A growing disquiet among bottom-up investors has marked the recent weeks. Interestingly, this is happening at a time when the Nifty 50 is trading close to its all-time highs and economic data is near its best levels in years. When data is strong, growth indicators are positive, and market inflows are ample, this should not be the case. Investors must actually be riding a wave of positive sentiment with the all-around optimism guiding them to invest more aggressively. That is hardly the case with seasoned investors.
Instead, private conversations are centred around the sudden drying up of liquidity in the small and microcap space, accompanied by the soaring impact costs of selling. Anyone who has seen multiple cycles clearly sees what is coming. With MTF data staring at them, and stocks with high financing crumbling on bad news or even just rumours, the signs have become increasingly ominous for anyone willing to notice them.
Interestingly, in this cycle, the trend’s momentum has taken far longer to break than usual in microcaps. In small caps, people still think the trend will regain its momentum mojo. Such is the power of recency bias prevailing even now.
Experience actually comes in most handy in such situations. It helps you moderate behaviour, look beyond the immediate and draw parallels to past lessons. Experience encourages you to think about how the present can be handled better and how the future must be approached in equity investing.
The market is set to move forward in 2026 towards newer approaches, fresher themes, and chastened valuations. This shift is crucial for every investor. Those who make this shift will be able to manage their investing far better than those who refuse to. Those who refused to do so in 2025 still have a chance to set themselves on the right future course, before it becomes too late.
The market will always be a friend to those who are flexible and will help them find themselves again when others begin to lose their way. It is high time we fix our GPS in equities and position ourselves on the right path towards future wealth creation.