47% of Small-Cap Stocks Trade Below Their Own 10-Year Average Valuations

Key Takeaways:

• About 47% of small-cap stocks were below their own 10-year average valuations in July 2026, according to Ambit Asset Management data. 
• The comparable figures were 31% for mid-cap stocks and 27% for large-cap stocks. 
• The share of small-cap stocks trading at a premium to their historical valuations fell to 33% in July 2026 from 64% in September 2024. 

Valuations across a sizeable part of India's small-cap universe have moved below their own historical averages after the market's earlier period of elevated pricing. 

Data from Ambit Asset Management showed that 47% of small-cap stocks were trading below their respective 10-year average valuations in July 2026. 

That proportion was substantially higher than in larger market-cap segments. About 31% of mid-cap stocks and 27% of large-cap stocks were below their own 10-year valuation averages during the same period. 

The comparison with 2024 shows how the valuation distribution has changed. 

In September 2024, around 64% of small-cap stocks were trading at a premium to their 10-year average valuations. By July 2026, the proportion trading at a premium had declined to 33%. 

Valuation Reset Is Not Uniform 

The figures do not mean that the entire small-cap market has become inexpensive. 

Instead, they indicate greater dispersion within the segment, with a larger proportion of individual companies trading below their own historical valuation levels. 

Ambit's analysis also showed the reset spreading across industries. Across 18 small-cap sectors, average relative valuations moved from a premium of roughly 20% to the five-year average in September 2024 to a discount of around 6%. 

The number of sectors trading below their longer-term averages increased from three to 12. 

Earnings remain an important part of the valuation equation. 

The Moneycontrol report cited expectations of stronger earnings growth in several smaller-company segments, while areas including capital goods, defence, power, transmission and distribution, precision manufacturing and electronics manufacturing were among those showing stronger growth expectations. 

For small-cap mutual funds, the data provides a broader picture of the market universe available to fund managers. It does not establish that every small-cap stock—or the category as a whole—is undervalued, since individual valuations and future earnings outcomes can differ substantially.