Smallcaps gain 24.6% in H1FY27 as domestic funds offset FII outflows

Indian stock markets saw a broad-based correction in September 2026, with the Nifty and Sensex falling nearly 6 percent each, while midcap and smallcap indices also recorded their first negative monthly close of the financial year. Foreign institutional investors pulled out ₹2.32 trillion during H1FY27, while domestic institutions bought ₹3.89 trillion worth of shares, fueling smallcap gains of 24.6 percent despite largecap underperformance. Rising crude prices near $109 a barrel and US bond yields at 19-year highs drove the selloff. The BSE market capitalisation stood at ₹471.86 trillion, with ₹18.4 trillion wiped out in September alone, though new IPOs added ₹10 trillion. Experts warn midcap and smallcap segments may be entering bubble territory.