As stock-market fireflies fade, fundamentals take centre stage in 2026

Mint analysis of 400 of the BSE 500 stocks. The broad-based rally created a rare environment where momentum often outweighed fundamentals.The market’s character shifted in 2025, as broad post-Covid gains gave way to selective performance driven by earnings and fundamentals.

Nearly 12% of companies that had gained strongly during the earlier period have since seen significant declines. These are the market’s “fireflies” — stocks that surged during the post-Covid rally but are now fading as conditions normalize.Even as the benchmark index Sensex rose about 46% over the 33 months from March 2023 to December 2025, firefly stocks slipped into losses or sharp corrections, unable to sustain momentum once growth expectations and liquidity normalized.

At the same time, roughly a quarter of BSE 500 stocks managed to outperform during the slowdown, highlighting a widening divergence in returns where solid performance is no longer broad-based.The correction so far resembles repricing rather than outright value destruction. Among 18 stocks that have corrected 10-30% since March 2023, nearly two-thirds are still trading at close to twice their March 2020 levels.

Only the steepest corrections—exceeding 50%—have fully erased pandemic-era gains.For most of these companies, the market appears to be recalibrating expectations rather than reassessing long-term viability.Ashish Chaturmohta, managing director and fund manager at Apex PMS, JM Financial, said the reversals reflect aggressive extrapolation of pandemic-era demand.“Many companies expanded capacity and fixed higher cost structures assuming elevated growth would endure,” he said. “But volumes, pricing power and margins normalized far sooner than expected as input costs rose and