The Nifty Smallcap index continued its downward trend on July 29, falling for the ninth straight session. Investors remained cautious as valuation concerns triggered profit booking in several smaller companies.
The index has now declined over 6% since July 17, raising red flags about stretched valuations in the broader market.
Valuation Worries Hit Broader Market Sentiment
Market participants linked the persistent sell-off to profit booking and nervousness over high valuation levels in the smallcap segment. The index slipped another 0.62% during Tuesday’s trade, extending its bearish streak.
Zen Technologies hit the 5% lower circuit, closing at ₹1,606.2 on the NSE, making it one of the biggest laggards of the day.
Other major decliners included:
-
Indian Energy Exchange (IEX): -3.66%
-
Poonawalla Fincorp: -3.58%
-
Delhivery: -2.75%
Recommended Read: India Overtakes China as Largest Smartphone Exporter to US in Q2 2025
Technical Indicators Signal Weakness, Say Analysts
According to Ruchit Jain, Vice President at Motilal Oswal Financial Services, the Nifty Smallcap index has shown a negative divergence with the RSI, a key technical indicator. This pattern typically signals weakening momentum, often followed by a correction phase.
“The index is in a corrective phase, but the longer-term trend remains intact,” Jain noted.
He also pointed out that the index may find technical support around the 16,900–16,800 range, which coincides with the 89-day Exponential Moving Average (DEMA).
“Traders should adopt a buy-on-dips strategy but be highly selective in stock picking,” he advised.
GRSE, RITES, MCX Also Under Pressure
In addition to Zen Tech and IEX, several other stocks also witnessed intraday losses of up to 3%, including:
-
Garden Reach Shipbuilders & Engineers (GRSE)
-
RITES
-
MCX
-
NBCC5
-
BEML
These sharp declines reflect the broader weakness in smallcap stocks as investors turn cautious.
Broader Outlook
Despite the ongoing correction, analysts maintain a cautiously optimistic view on the smallcap space. The recent drop is seen as a healthy consolidation, provided key support levels hold.
Traders are advised to stay alert for bounce-back opportunities near support zones, but with a selective and risk-aware approach.
Click here to explore other
