ETMarkets Smart Talk | Don’t mistake record highs for a broad rally: Why mid- and smallcaps are becoming increasingly selective, says N. ArunaGiri

Mid- and smallcap indices may be scaling fresh highs, but the rally is far from broad-based. Unlike the one-way momentum seen across the segment in 2024, the current market is being driven by sharp divergence, with investors rewarding companies delivering earnings growth and punishing those with weak earnings visibility.In this edition of ETMarkets Smart Talk, N. ArunaGiri, Founder & CEO of TrustLine Holdings, argues that the record-high narrative masks a much more selective market underneath, where stock and sector-specific momentum is increasingly dominating.With smallcaps also trading at significantly higher valuations than in previous cycles, the key question for investors is whether the current gains are backed by sustainable business prospects—or simply momentum feeding on momentum. Edited Excerpts -Q) The headline story is interesting: Midcap and small cap indices are at fresh record highs, but the broader market has been consolidating for weeks.