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The Indian stock market is witnessing a sharp divergence between large-cap stocks and the broader market, with several blue-chip companies trading near multi-year lows even as mid- and small-cap indices have held up relatively better. The Nifty 50 is down 13.40% year-to-date, compared with a 1.79% decline in the Nifty Midcap 100, while the Nifty Smallcap 100 has gained 8.77% during the same period. Over the past month, however, selling pressure has broadened, with the Nifty 50 down 6.50%, the Midcap 100 down 7.38%, and the Smallcap 100 down 4.14%. The weakness in large caps has been particularly evident among some of India's largest companies. Reliance Industries is trading at a three-year low, with the stock down 24.71% year-to-date, 7.68% over one month and 4.92% over one week. Meanwhile, Infosys, Tata Consultancy Services (TCS), Hindustan Unilever (HUL) and HDFC Bank are trading near five-year lows. Infosys has fallen 38.90% year-to-date, while TCS is down 36.27%, HUL has declined 19.29%, and HDFC Bank has lost 28% over the same period. The market's recent decline has been driven by a mix of persistent FII selling, high crude oil prices, rising global bond yields, and a weakening rupee. On 29 September, FIIs sold 9,980.22 crore rupees' worth of Indian equities, which was their largest single-day outflow in almost six months, and the Nifty 50 closed at 22,716.20. At the same time, the broader market has also begun to feel the pressure. On 29 September, the Nifty Midcap 100 dropped by 0.8 per cent, and the Smallcap 100 fell by 1%, indicating that the recent sell-off is not limited to large-cap companies. Sunny Agrawal, Deputy Vice President – Fundamental Research at SBI Securities, said investors should selectively focus on blue-chip companies, as valuations have become more comfortable and offer a favourable risk-reward profile. He added that investors should keep realistic expectations, with blue chips likely to deliver 10–12% long-term CAGR, broadly in line with nominal GDP growth. Agrawal said the potential Jio IPO ahead of Diwali could improve sentiment around Reliance Industries and create scope for value unlocking. For HDFC Bank, greater clarity on its leadership could also provide a positive sentiment trigger. However, persistent FII selling has added pressure on blue-chip stocks, while slower earnings growth has been a key factor behind their recent underperformance. At the same time, he expects select mid-cap stocks with strong earnings growth visibility to continue delivering outperformance. Rajesh Bhosale, Technical Analyst at My Advisor Alpha, said RIL, Infosys, TCS, HUL and HDFC Bank have largely remained range-bound over the past three to four years, with HDFC Bank, TCS, HUL and Infosys delivering negative five-year returns. He attributed the trend largely to FII flows, noting that these large-cap stocks tend to benefit when foreign investors increase exposure to India and face pressure when FII selling intensifies. Bhosale said FIIs have sold around ₹2.42 lakh crore this year, while their ownership of Indian equities has fallen to a 17-year low. Meanwhile, steady domestic SIP flows have supported mid- and small-cap stocks, which he said have gained around 31% since April, compared with roughly 5% for the Nifty. This has created a two-speed market, with large-cap stocks lagging while the broader market remains relatively stronger. However, Bhosale noted that large caps tend to move in cycles and, after several years of consolidation, these stocks are now approaching their long-term support zones. He said investors could consider gradually rebalancing towards these relatively neglected large caps rather than making a wholesale shift away from small- and mid-caps. He suggested a staggered approach over six to nine months, with entries based on support levels and base breakouts rather than short-term headlines, while maintaining clear exit levels below key support zones. Disclaimer: The views and recommendations above are those of individual analysts or broking companies, not Mint. We advise investors to check with certified experts before making any investment decisions. Dhanya Nagasundaram works as a Content Producer at LiveMint, specializing in news related to financial markets, stocks, and business. With over eight years of experience in journalism and content creation, she has honed her skills in data-driven reporting and market analysis. Her focus is on monitoring stock trends, initial public offerings (IPOs), corporate news, policy shifts, and larger economic trends that affect investors and market players. <br><br> At LiveMint, Dhanya consistently writes and produces articles that make complex financial topics accessible to readers. She keeps a close eye on equity markets, commodities, and macroeconomic indicators, assisting audiences in comprehending how global and domestic events influence investment perspectives. Her stories frequently underscore emerging trends within sectors, the IPO market, company earnings results, and market strategies pertinent to both retail and institutional investors. <br><br> Before her tenure at LiveMint, Dhanya accumulated a wealth of professional experience at various companies, including MintGenie, Informist, Cogenics, Chary Publications, KPMG, and the Royal Bank of Scotland. These positions allowed her to establish a solid foundation in financial research, reporting, and content creation. <br><br> Throughout her career, she has explored numerous subjects such as trading strategies, commodities, IPOs, wealth generation, corporate profits, and macroeconomic indicators. Her background in both financial journalism and corporate settings has given her the ability to tackle stories with analytical rigor while ensuring clarity for her audience. Through her contributions, Dhanya strives to deliver insightful, trustworthy, and investor-centric financial content. Catch all the Business News , Market News , Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates. Oops! Looks like you have exceeded the limit to bookmark the image. Remove some to bookmark this image.
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