Nifty up 7.5%, small caps up 18%, 47 of 50 Nifty stocks in the green — April was a remarkable recovery
Markets have a way of recovering fastest when the pessimism is most uniform. April 2026 was a case in point. After what PhilipCapital describes as “the worst monthly correction since the Covid-19 crash” in March, Indian equities staged a broad and powerful recovery — with the Nifty rising 7.5%, midcaps surging 13.6% and small caps leading the charge at 18.4%. Forty-seven of the fifty Nifty stocks ended the month in positive territory. The recovery was not a narrow, sector-specific move. It was broad, and it was meaningful.
The Breadth of the Recovery
What makes April’s performance notable is less the index return and more what was underneath it. Every major sector contributed positively to Nifty’s gains — financials, industrials, discretionary, energy, staples, metals, materials, utilities and healthcare all added. Only IT dragged, subtracting modestly from the total. Within industrials, Adani Enterprises gained 37%, Adani Ports 26% and L&T 15%. All three Nifty metals stocks posted double-digit gains. Trent, Nestle, Bajaj Auto and Titan all had strong months in the consumer space. Bajaj Finance gained 17%.
Just three stocks in the entire Nifty 50 ended April in the red — HCL Tech, Infosys and HDFC Life. For a month that began with significant macro uncertainty, that is a remarkably clean sweep.
Small and Mid Caps Did the Heavy Lifting
The standout of the month was the outperformance of smaller stocks. The small cap index rising 18.4% and the midcap index gaining 13.6% — both comfortably ahead of the Nifty’s 7.5% — reflects a catch-up trade after months in which these segments had been hit harder than large caps on the way down. Whether that outperformance sustains will depend on earnings delivery in the coming results season, but April’s move suggests that domestic investor appetite for risk remains intact.
FIIs Are Still Selling — DIIs Are Absorbing
The one persistent shadow over the April rally is the continued foreign institutional selling. FII net outflows from equities in April were Rs 701 billion — significant, though meaningfully lower than the Rs 1,225 billion outflow in March. DII inflows of Rs 511 billion partially cushioned the blow, continuing the pattern of domestic money absorbing foreign exits that has characterised the last several months. PhilipCapital’s note is pointed on this: “FII selling pressure continues” is part of the headline, not a footnote.
The Nifty has underperformed the FTSE Emerging Markets index by 2% in April and by 30% over the past year, and remains 9% below its peak. Against a global backdrop where Korea gained 31%, Taiwan 23%, Japan 16% and the US 10% in April alone, India’s recovery — while real — has not yet closed the relative gap that opened up over the prior twelve months.
Where Valuations Stand
With the recovery, valuations have moved back up. The Nifty is now trading at 18.9x one-year forward earnings — up from 17.5x in March. Midcap PE has risen to 27.3x and small cap to 22.3x. PhilipCapital’s note provides a useful sector-by-sector read: pharma and energy are trading above one standard deviation above their long-term averages. Autos, metals and infrastructure are above long-term averages. Banks, IT and PSU stocks are trading above one standard deviation below their averages — meaning they have recovered but remain below historical norms.
Within the Nifty 50, sectors are trading at 2-31% discounts to their one-year peaks. IT has corrected the most — 31% from its peak. Consumer staples and healthcare are both 14% below their peaks. Financials are 12% below. At the other end, industrials, metals and utilities are trading close to their one-year highs.
The question now is whether the recovery has enough fundamental support to continue, or whether it was primarily a technical bounce from oversold levels. With FII selling still active, valuations moving back toward fair value rather than cheap, and global markets having already recovered strongly, the easy part of the trade may have been April itself.