Small-Cap Selloff Deepens as Market Turns Cautious | Code B Blog
India’s small-cap segment is facing intense selling pressure as frontline indices pause their powerful multi‑year rally. Monday’s market action sent a clear message: risk appetite is cooling, and investors are rotating back into stability and quality.
Only 3 Stocks in Green: Small-Cap Index Bleeds Heavily
The Nifty Smallcap 100 witnessed a brutal decline, with 97 out of 100 stocks closing in the red.
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Smallcap 100: -2.6%
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Midcap 100: -1.8%
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Nifty50: -0.9%
This sharper fall shows the pressure cooker situation inside the broader markets—and why investors are becoming selective.
5-Day Slide: Small Caps Down Nearly 5%
The small-cap index has now fallen ~5% in the last 5 sessions andsessions and is down 9% year-to-date.
In contrast:
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Midcaps: +4% YTD
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Nifty50: +10% YTD
The market is clearly shifting towards safer, large-cap names, especially as volatility spikes.
What’s Driving the Small-Cap Selloff?
Stretched Valuations Post a 4-Year Rally
Many small-cap stocks were trading at unsustainably high valuations, making them vulnerable to sharp corrections.
Strong FII Outflows Favoring Large Caps
Foreign investors have been offloading Indian equities for weeks, gravitating towards liquid, stable large‑caps.
Liquidity Squeeze
Record IPO listings and expiring lock-ins have drained liquidity from the small-cap bucket.
Global Event Risk: US Fed Policy
Caution ahead of the US Federal Reserve’s rate decision has led to broad-based profit-taking.
Monday’s Market Snapshot
Top Small-Cap Losers
| Stock | Decline |
|---|---|
| Kaynes Technologies | -12.55% |
| Tata Teleservices | -7.10% |
| Data Patterns | -6.47% |
| Reliance Power | -6.05% |
Additional names like Neuland Labs, RailTel, Poonawalla Fincorp, and Aditya Birla Real Estate also fell 5–6%.
Benchmark Indices
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Sensex: -610 points → 85,103
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Nifty50: -226 points → 25,961
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All sectors closed in red
Top losing sectors:
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Nifty Realty: -3.5%
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Nifty PSU Bank: -2.8%
What Experts Are Saying
Siddhartha Khemka – Motilal Oswal
Market-wide profit booking + FII selling + caution before the Fed meetingFincorp, and = broad sell-off across small & mid-caps.
Ajit Mishra – Religare Broking
Weakness stems primarily from global uncertainty and traders reducing exposure before policy events.
Big Picture: Small Caps Enter Correction Mode
The data suggests:
A structural shift toward large caps
Small caps correcting after years of overperformance
Increasing risk aversion among both FIIs & domestic investors
Until global clarity improves and domestic liquidity stabilizes, small-cap volatility is likely to stay elevated.
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