Retail investors’ favourite small-cap segment has been facing a challenging time on Dalal Street in 2025, as a majority of counters have lost significant value, pushing them to trade at multi-month lows.
The once-favoured space is now lagging, as poor earnings and rich valuations have led to EPS downgrades across the pack, making them vulnerable to even minor corrections in the Indian stock market. This has also prompted investors to alter their portfolios toward large-cap and mid-cap stocks, thus hitting the Nifty Smallcap 100 index hard.
The index has already lost 6% in 2025, sharply underperforming the Nifty Midcap 100 and the benchmark Nifty 50, which rallied 5.20% and 9.70%, respectively, over the same period. If the index ends the year lower, which appears likely, it will mark its first yearly decline in two years and the second-biggest drop since 2022, when it corrected 14%.
Domestic brokerage Motilal Oswal said that 40% of small-cap stocks under its coverage posted numbers below estimates in Q2FY26, with overall earnings dipping 5% YoY compared to its estimate of 3% YoY growth. Conversely, within the large-cap and mid-cap universes, only 19% and 22% of companies, respectively, missed estimates.
JM Financial also noted that earnings misses in the small-cap stocks it tracks were higher than those in mid-caps and large-caps during the September quarter. It said that 32% of small-cap companies missed expectations in Q2, while the figures were lower for mid-caps and large-caps at 27% and 26%, respectively.
Tejas, FirstCry, Newgen, and Zen Tech see 40-60% crash
43 constituents of the Nifty Smallcap 100 index are down between 20% and 60% in 2025 so far, with Tejas Networks emerging as the top laggard as it crashed 60% to ₹480 apiece, marking its first yearly drop in five years.
Brainbees Solutions, the company that operates baby and mother care products retailer FirstCry, also posted a similar drop of 53.3%, falling to ₹305 apiece, leading to significant wealth erosion for IPO investors.
Newgen Software is also likely to post its first yearly drop in two years as the stock plummeted 49% to ₹875, while Zen Technologies, which made stellar moves in previous years, has also come under selling pressure, resulting in a 43% crash to ₹1,395 apiece.
After five years of sustained gains, Jupiter Wagons saw its shares weaken by 42% to ₹291.60, while Ramkrishna Forgings is also witnessing heavy bleeding on Dalal Street, falling 42% to ₹519.90 apiece and poised to record its first yearly loss since 2019.
IT stocks such as Cyient, Sonata Software, and Birlasoft tumbled 40%, 39%, and 32%, respectively. EMS stocks, including PG Electroplast and Kaynes Technologies, dropped 42% and 22%, respectively.
Other key stocks, including KEC International, Natco Pharma, Swan Corp, HFCL, NCC, Action Construction, BLS International, CG Consumer, Tata Teleservices, KFin Technologies, Anant Raj, Aditya Birla Real Estate, Piramal Pharma, Brigade Enterprises, Triveni Turbine, Bata India, CAMS, Himadri Speciality Chemicals, Tata Chemicals, IEX, Amara Raja, and JBM Auto, also fell between 20% and 40%.