Midcap IT Stocks Outperforming Largecaps: Silent Trend Retail Investors Should Watch
SECTOR NEWS
The Silent Trend: Why Midcap IT Stocks Are Quietly Outperforming Largecaps This Quarter
The Trend Most Investors Overlook
In India’s ever-evolving stock market, most retail investors stick to tracking the big names — Infosys, TCS, Wipro, or HCL Tech. But behind the scenes, a quiet shift is taking place. While largecap IT stocks have stayed range-bound in recent months, midcap IT stocks are quietly outperforming, delivering healthy returns that many small investors are missing.
If you’re still holding only the well-known bluechip IT companies, you might want to dig deeper. This silent trend in midcap IT could make a meaningful difference to your portfolio — if you understand what’s driving it, how to spot the right opportunities, and how to manage the risks involved.
How the Data Reveals the Silent Trend
Let’s get straight to the numbers — because the data never lies.
The Nifty IT Index, which tracks India’s top IT companies, has delivered around 4–5% returns in Q1 of FY25 (April–June 2025).
Meanwhile, a basket of select midcap IT companies — like KPIT Technologies, Mastek, Cyient, and Coforge — has seen gains ranging between 15% and 20% in the same quarter.
A few niche players have even touched new 52-week highs, outperforming the Nifty 50 and broader market indices.
This difference might look small on paper, but over time, compounded outperformance in midcap IT stocks can significantly boost your total returns — especially if you’re investing with a multi-year horizon.
Why Are Midcap IT Stocks Outperforming?
So, what’s driving this outperformance when large IT players are still cautious about global demand? There are a few practical reasons behind this divergence:
1️⃣ Niche Specialisation:
Unlike largecap IT companies, which often rely on huge contracts from Fortune 500 clients, many midcap IT companies have carved out highly specialised niches. For example, KPIT Technologies focuses on electric vehicle software and embedded systems, while Cyient works with aerospace and engineering clients. This specialisation helps them grow faster, win unique deals, and maintain margins even when global spending slows.
2️⃣ Diversified Client Base:
Midcap IT companies usually have a broader base of small-ticket clients instead of a few big whales. This spreads their risk. If one client delays spending, the impact on revenue is limited. This diversification has given midcaps a certain resilience this quarter.
3️⃣ Currency Tailwind:
A slightly weaker rupee against the dollar has turned out to be an advantage for export-heavy midcap IT companies. Since many midcaps earn 80–90% of their revenue from overseas, even a small currency shift improves profitability. Largecaps enjoy this too, but their dependency on certain verticals can limit benefits.
What Retail Investors Should Know
At first glance, this might sound like a clear “buy midcaps” signal — but every investor must remember: higher returns often come with higher risks. Midcap IT stocks are known for their volatility.
Here’s what you should keep in mind:
Valuations are getting richer: Some midcap IT stocks now trade at premium valuations compared to their own 5-year averages. This means the margin for error is small — any negative surprise could lead to a sharp correction.
Liquidity is lower: Many midcap stocks have lower daily trading volumes. In times of panic selling, exiting large quantities can be tough.
Earnings surprises: Smaller players may rely on a few big clients for order books — if one or two big deals get cancelled, the stock could take a hit.
How to Spot Good Midcap IT Stocks
Retail investors often ask: “So, how do I pick the right midcaps in this space?”
Here are a few tips that can help:
Stick with companies showing consistent order book growth. Look for firms that have signed multiple long-term contracts rather than one-off projects.
Check debt levels. Avoid companies with rising debt or poor cash flow.
Read quarterly results and management commentary. You don’t need to be a research analyst — even scanning the earnings press release and investor calls can give you a clear idea of their growth plans.
Focus on their niche. A company that’s first to build expertise in a sunrise sector (like EV or AI services) will likely enjoy better pricing power.
Midcap IT Stocks to Keep an Eye On
To give you a starting point, here are a few midcap IT companies that market watchers are talking about right now. They’re not overnight jackpot ideas — but they do show why midcap IT is worth watching.
KPIT Technologies: They’re doing exciting work in the automotive software space, especially for electric and self-driving cars. It’s a small but growing niche, and KPIT is betting big on it.
Cyient: Cyient has built a strong name in engineering services for industries like aerospace, telecom, and railways. This kind of diversified client base helps them ride out bumps in any single sector.
Mastek: Mastek’s focus is more on cloud migration and digital transformation, especially for overseas clients in healthcare and government. These long-term projects give them decent revenue visibility.
A quick reminder — these are just examples to watch, not stock tips. Please do your own homework. If needed, talk to a SEBI-registered financial advisor before you put any money in.
So, Should You Add Midcap IT Stocks?
If you’ve only ever looked at the big IT names — Infosys, TCS, Wipro, HCL — this might be the right moment to open your watchlist to some midcaps. They’ve shown they can quietly outperform, especially when they’re nimble and focused on new growth areas.
But remember: bigger returns usually come with bigger mood swings. Midcap IT stocks can be more volatile. One bad quarter or a global demand dip can hit these smaller companies harder than the big players.
That doesn’t mean you should ignore them. It just means you shouldn’t go “all in” without a plan. Think of it this way:
Add a little spice, not the whole meal. Use midcaps to complement your core portfolio, not replace it.
Balance is key. A mix of largecap stability and selected midcap growth can smooth out rough patches.
Keep an eye on your comfort zone. If price swings make you lose sleep, dial it back.
Key Takeaway for Everyday Investors
This midcap IT trend is a good reminder that in the market, sometimes the best ideas are hiding where most people aren’t looking.
You don’t have to be a full-time analyst to benefit from these opportunities.
Start simple:
Follow a few midcap IT names.
Read their quarterly updates.
Watch how their earnings grow.
See what their niche is and how strong their order book looks.
Keep asking: Does this company solve a real problem? Do they have an edge?
If the answer is yes, you’ll slowly build confidence to invest smartly — and you won’t panic at every small dip.
In the end, the stock market will always test your patience — but if you stay curious and do your homework, these silent trends can quietly reward you over time.
Stay informed, stay grounded — and here’s wishing you steady, sensible profits.
Happy investing!
About the Author
Nitin Kumar Gullianya is the founder and lead writer at StocksInNews.in. A B.Tech graduate with over 15 years of real-world investing experience, Nitin shares clear, research-driven insights to help retail investors make better decisions.
Disclaimer:
This article is for informational purposes only and does not constitute investment advice. Stock market investments are subject to market risks. Please do your own research and consult a SEBI-registered financial advisor before making any investment decisions. The examples mentioned are for educational purposes and should not be taken as recommendations. Past Returns are not the guarantee of future returns