New Delhi, June 17 -- Since the outbreak of the US-Iran conflict in late February, India's large-cap stocks have lagged amid sluggish earnings growth, while mid- and small-caps have emerged as market leaders. Since 27 February, the last trading day before the conflict began, the benchmark Nifty50 has fallen 4.7%. In contrast, the Nifty Midcap 150 and Nifty Smallcap 250 have gained 3.8% and 9.4%, respectively, with both indices hitting fresh highs in May.

As a result, the combined share of mid- and small-caps in the Nifty 500's market capitalization rose to a record 35.8% as of 14 June, according to Yes Securities.

The shift in capital away from blue-chip stocks, traditionally viewed as safer bets, underscores a growing appetite for risk...