India’s benchmark index Nifty may be hovering near record highs, but beneath the surface, the broader market tells a very different story.

Around 80 percent of stocks with a market capitalisation above Rs 1,000 crore have been in bear market territory since September 2024 — meaning they have fallen sharply from their recent peaks even as the headline index appears strong.

This divergence is largely because only a handful of heavyweight stocks are driving the index upward, masking widespread weakness across the broader market. As a result, the index performance may not fully reflect the reality faced by most investors holding diversified portfolios.

The trend suggests that while large indices like the Nifty remain resilient, many mid- and small-cap stocks have corrected significantly — in some cases making valuations more reasonable compared to the elevated levels seen earlier.

For investors, this creates a mixed environment. On one hand, high valuations in large-cap stocks could limit upside in the near term. On the other, beaten-down quality stocks in the broader market may present selective opportunities for long-term investment.

In essence, the market is not uniformly bullish despite the strong index levels. The rally is narrow, and future returns may depend more on smart stock selection than simply tracking headline indices.