Why Mid-Caps Outperformed: The Sectors Leading the Rally

Indian mid-caps have outperformed large caps over the past six months. The rally was driven mainly by domestic liquidity, improving earnings and strong sector-specific growth themes. 1. Pharma & Healthcare: Earnings Recovery 🚀 Pharma emerged as a leading mid-cap theme, supported by improving earnings, new product opportunities and recovery in US generics. Laurus Labs was a major outperformer, helped by strong growth in its CDMO and generics businesses. FPI buying in healthcare also returned, adding further support to the sector. 2. Power & Capital Goods: India’s Capex Story ⚡ Rising power demand, transmission expansion, infrastructure spending and the energy transition supported the sector. BHEL benefited from strong order inflows, while Hitachi Energy India gained from rising transmission and grid-investment demand. Capital goods did not see consistent FPI buying, highlighting the role of domestic liquidity and strong fundamentals. 3. Financial Services: Rising Market Participation 💰 Financial and market-linked businesses benefited from rising retail participation, digital payments and India's growing financialisation. Paytm gained from improving profitability, merchant payments and financial-services growth. Investment View The six-month rally reflects three key themes: healthcare recovery, India’s power and capex cycle, and financialisation of savings. The key takeaway: mid-caps rose mainly on domestic liquidity, earnings growth and structural themes—not simply because of FII buying. After sharp gains, investors should focus on valuations, earnings visibility and sustainable growth rather than chasing momentum. $LAURUSLABS !BHEL !ofss