Indian Banking Sector and Smallcaps Attract Investors

India's banking sector is expected to rebound with net interest margins projected to recover by the second half of FY26, driven by easing deposit costs, improved liquidity, and continued resilience in asset quality. Foreign Institutional Investors are showing increased interest in India's smallcap stocks, with several experiencing rallies over 50% in 2025, signaling strong market confidence. In addition to Indian markets, global investors are eyeing international and emerging market stocks for diversification and growth, though risks such as currency volatility remain. In the US, the Russell 2000 index highlights small-cap companies like Impinj and AeroVironment, which are outperforming peers through innovation and financial strength. Nevertheless, many small-cap stocks, both in India and globally, are high-risk due to overleverage or weak sales, emphasizing the need for careful stock selection. Overall, investors have selective opportunities amid robust institutional activity, but should prioritize due diligence and risk management.