Why Recent Dips In Smallcaps Often Precede Giant Leaps

Market Update - Monday, 09 Feb

Monday, February 9, 2026, proved to be a positive day for the markets following the confirmation of the US-India deal over the weekend. Despite some concerns regarding an overhang on Russian oil, where the US suggested a 25% tariff might return if purchases continue, the situation remains stable.

While Indian ministers managed the delicate topic cautiously, Russia is already adapting by increasing supplies to China. This leaves India with viable alternatives in Venezuelan or US oil, effectively minimizing immediate controversy.

The markets opened with a nice gap up today, closing 0.68% higher. While the move was not overly loud, the ability to maintain that gap throughout the day indicates a positive undercurrent. There are now two distinct gaps—one from four days ago and one from today—which typically only fill in the event of dramatic negative news.

• Nifty Junior performed even better, rising 0.97% and challenging previous highs, while momentum scores across the board turned positive.

• The mid-cap segment saw a remarkable run, gaining 1.57% and reaching a new monthly high.

• Small caps also gained significant ground with a 2.55% jump; after being hit hard over the last year and a half, they are beginning to look much stronger.

• Micro caps followed suit with smart gains, and Nifty Bank closed at its highest point ever, up 0.91%.

• Meanwhile, the gold market remains tepid but rose 0.98%. February is expected to be a tricky month for precious metals due to the Chinese New Year holidays and the upcoming February 27th deadline for COMEX delivery notes, which will test whether supply can meet buyer demand.

• Silver has also recovered nicely from recent lows, up 4.22%, maintaining a positive long-term trend despite recent volatility.

Other Market Triggers

• State Bank of India was a standout performer, surging 7.4%, which suggests strong institutional buying.

• Other notable gainers included Sriram Finance at 6%, and Dr. Reddy's at 2.76% as it prepares to manufacture the drug Ozempic in India.

• In the Nifty Next 50, stocks like CG Power, HAL, and Solar Industries showed strength, while Siemens and Britannia were among the few laggards.

• Shipping Corporation of India was the mover of the day, jumping 20% following a surge in Q3 net profits.

U.S. Market Updates

• The US markets provided a strong lead-in with gains between 2% and 3.5% in the previous session.

• Tech leaders like Nvidia and AMD both rose 8%, recovering from earlier losses, though Amazon saw a decline of 5.5%.

• This volatility in US tech is reflected in various investment strategies, though these do not constitute direct recommendations.

What to watch next ?

• A pivotal shift is occurring in Indian market dynamics, as domestic holdings in Nifty 50 stocks have surpassed those of Foreign Institutional Investors (FIIs) for the first time in recorded history.

• While media discourse often underestimates domestic investors, the data suggests that the power and knowledge of the masses are significant.

• Domestic flows are a reflection of substantial wealth creation over the last five years across equities, real estate, and precious metals.

• As FIIs realize they may be missing the opportunity to buy at lower levels, the influence of domestic capital continues to stabilize and drive the market forward.

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What To Read This Week ?

The Smallcap Springboard: Why Recent Dips Often Precede Giant Leaps

History Doesn't Just Repeat; It Rhymes

While most investors are currently fixated on short-term volatility and tax concerns like STT, a look back at the last 15 years tells a different story. Data presented by Sameet Bhartak regarding the Nifty Smallcap 100 reveals a consistent pattern: sharp drawdowns are almost always met with even sharper recoveries. From the 24% fall in 2009 to the current 9% dip in early 2026, the market has a habit of testing our resolve before rewarding our patience.

The Anatomy of a Recovery

The numbers are hard to ignore. When we look at the historical "Bottom-to-Recovery" stats, the bounce-back is often exponential. Consider these historical turnarounds within a single year of hitting bottom:

On average, while the fall feels painful, the recovery tends to clock in at 64% within just 8 to 10 months of hitting the bottom.

Noise vs. Fundamentals: What Really Matters

Currently, the market sentiment is clouded by negativity—worries over divestment timelines and tax structures. However, in the background, significant catalysts are brewing. Major trade deals with the US and EU, along with a massive Capex push in the budget, are the real engines of growth. By the time these "big stories" reflect in the headlines, the market will likely have already moved.

The Psychology of Forward Thinking

Investing is not about how you feel today based on what happened yesterday; it’s about anticipating where we will be tomorrow. To succeed, you must break free from the "neutrality bias"—the feeling that the market is stuck or can't rise. Markets are forward-looking mechanisms. If you wait for the "feeling" of the market to improve, you will likely miss the most profitable part of the recovery.

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