Mumbai: Broader markets are on a roll, with midcap and smallcap indices near record highs, but the rally beneath the surface is far from broad-based. A handful of stocks have contributed a larger chunk of the gains since April, according to ETIG calculations.

The Nifty MidCap 150 has rallied nearly 3821 points, or 20%, since the start of April. Of the total gains, 15 stocks, including Coforge, Vodafone Idea, One97 Communications, Larus Labs, BHEL, Lenskart Solutions, MCX, BSE, IDFC First Bank, Federal Bank, Dixon Tech, PB Fintech, Billionbrains Garage, Info Edge India and Yes Bank contributed more than 1,924 points, or over 50%, of the gains.

The trend is similar in the Nifty SmallCap 250, which has rallied 4,074 points, or 28.5%, over the same period. 28 stocks such as Meesho, Ather Energy, Welspun Corp, HFCL, RBL Bank, Sona BLW Precision, Aster DM Quality, Redington, Neuland Lab, Gland Pharma, Navin Flurine, Aegis Logistics, Sai Life Sciences, Syrma SGS Tech, PNB Housing Fin, Craftsman Automation, Kirloskar Oil, RR Kabel, IIFL Finance, Piramal Pharma, Anand Rathi, Cartrade, Aditya Infotech, Urban Co, Himadri Speciality, Wockhardt, Tata Tech, Karur Vysya Bank - contributed around 2,038 points, or 50%, of the gains.

"The mid- and small-cap indices at record highs, driven disproportionately by a relatively small set of stocks, point to a selective rather than broadly healthy rally," said Saurabh Jain, head of fundamental research at SMC Global Securities. "Narrower breadth means headline gains are less representative of the underlying universe."

For the Mid-cap 150, the remaining 109 gainers contributed nearly 2,216 points, while 26 stocks dragged the index down by around 318 points. In the case of Small-cap 250, the remaining 182 gainers contributed about 2,227 points, while 40 stocks shaved nearly 189 points off the index.

Jain attributed the concentration of gains to stronger earnings growth in select companies, sustained domestic liquidity, sector rotation into capital goods, defence, metals, financials and manufacturing, and stock-specific re-ratings. Elevated valuations in some pockets have amplified the skew, he said.

Read more: US stocks today: US stocks end lower as oil, yields raise September jitters

Analysts said the current phase is more stock-specific than some of the broader mid- and small-cap rallies seen after 2020 and during parts of FY24. Frequent index reconstitution also complicates historical comparisons, with more than 10% of constituents changing over six months and nearly half over two years.

Valuations, meanwhile, have become demanding. The Nifty MidCap 150 trades at a one-year forward Price-to-Earnings (PE) Ratio of 28.95 times, compared with its 10-year average of 26.78 times, while the Nifty SmallCap 250 trades at 25.23 times against its 10-year average of 19.96 times.

Kranthi Bathini, equity strategist at WealthMills Securities said a broadening of the rally would require more uniform earnings growth across companies, continued domestic inflows and improved market breadth.

"If gains remain concentrated, the market could become more vulnerable to profit-taking, liquidity shocks or earnings misses in the stocks leading the rally," said Bathini. "Selectivity and focus on balance-sheet strength remain essential."