Smallcap Stocks Plunge Up to 46% as Broader Indices Snap Two-Week Winning Streak

Contents

Sectoral Indices End Mostly in Red; PSU Banks Buck the Trend FII Outflows Continue to Weigh on Market Sentiment Smallcap Stocks See Steep Declines; Some Lose Up to 46%Technical View: Nifty May Test 25,400 Before Rebound Broader Outlook: Mixed Earnings, Global Cues Keep Markets Range-Bound

Indian equity markets witnessed sharp volatility this week, as smallcap stocks tumbled as much as 46%, and the Sensex and Nifty ended their two-week winning run amid persistent foreign investor selling, mixed earnings, and weak global cues.

The BSE Sensex slipped 722.43 points or 0.86% to close at 83,216.28, while the Nifty50 declined 229.8 points or 0.89% to end at 25,492.30. The broader midcap and smallcap indices fell between 0.6% and 1.5%, signaling renewed weakness across the market after a steady rally in October.

Despite the broader weakness, the Nifty PSU Bank index stood out with a 2% weekly gain, supported by strong earnings, improving asset quality, and renewed speculation about a possible FDI cap hike in the sector.

Sectoral Indices End Mostly in Red; PSU Banks Buck the Trend

Market sentiment turned negative across sectors, with heavy losses in media, defence, metal, and IT stocks.

Nifty Media fell 3.2%,
Nifty Defence slipped 2%,
Nifty Metal declined 1.7%, and
Nifty IT shed 1.6%.

In contrast, the Nifty PSU Bank index gained 2%, driven by robust second-quarter results and optimism over policy support.

According to Vinod Nair, Head of Research at Geojit Financial Services, “Indian equity markets ended on a negative note amid the absence of fresh domestic catalysts and continued FII outflows. Select sectors found support from upbeat Q2 earnings, with PSU banks in focus due to their improving financial health. However, IT and metal stocks faced pressure from weak global sentiment and fading expectations of an early Fed rate cut.”

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FII Outflows Continue to Weigh on Market Sentiment

Foreign Institutional Investors (FIIs) remained net sellers during the week, offloading equities worth ₹1,632.66 crore, while Domestic Institutional Investors (DIIs) absorbed the selling, buying equities worth ₹16,677.94 crore.

Analysts say persistent FII selling amid global uncertainty and rising US bond yields have limited upside potential for Indian equities in the near term.

On the global front, investor sentiment was cautious amid concerns around trade and tariff negotiations, while mixed PMI readings and strong GST collections indicated that India’s domestic economy remains resilient.

“Going forward, market direction will depend on inflation data, FII activity, and developments around the US government shutdown and trade negotiations involving India, China, and the US,” Nair added. “A buy-on-dips strategy could still be prudent, given that most Nifty companies have reported earnings broadly in line with expectations.”

Smallcap Stocks See Steep Declines; Some Lose Up to 46%

The BSE Smallcap index fell 1.5% for the week, with several smallcap counters witnessing sharp sell-offs.

Top losers included:

Worth Investment & Trading,
Fischer Medical Ventures,
Stallion India Fluorochemicals,
Reliance Infrastructure,
Bliss GVS Pharma,
Utkarsh Small Finance Bank,
VL E-Governance and IT Solutions,
Reliance Power, and
Punjab Chemicals & Crop Protection — all of which declined between 15% and 46%.

However, some smallcap names defied the broader trend and posted impressive gains. Stocks such as Thangamayil Jewellery, LG Balakrishnan & Brothers, Interarch Building Solutions, CCL Products India, BLS E-Services, and ASM Technologies surged 15–56%, driven by positive earnings surprises and improved business outlooks.

Technical View: Nifty May Test 25,400 Before Rebound

Market experts expect further short-term weakness, although the medium-term outlook remains positive.

Nagaraj Shetti, Senior Technical Research Analyst at HDFC Securities, said, “The short-term trend of the market remains weak, but the medium-term structure is still bullish. Nifty is expected to slide toward the key support range of 25,500–25,400, before staging a rebound. A buy-on-dips approach could work well as long as Nifty holds above this zone.”

Similarly, Rupak De, Senior Technical Analyst at LKP Securities, noted that Nifty’s recent decline below a crucial moving average has strengthened the bearish tone.

“The index has been correcting since forming a double top near 26,100 on the hourly chart. The crucial resistance is placed at 25,600—as long as Nifty trades below this level, sentiment may remain weak. A fall below 25,400 could trigger further downside,” De said.

Broader Outlook: Mixed Earnings, Global Cues Keep Markets Range-Bound

Analysts believe that the next leg of the rally will depend on inflation data, policy cues, and foreign fund inflows. Although Q2 results from India Inc have been largely in line with estimates, markets may remain range-bound until global cues turn supportive.

With strong domestic fundamentals and resilient economic data, long-term investors continue to find opportunities in select largecap and PSU names. However, for short-term traders, volatility is expected to remain elevated.