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Stock Market-The month of December has not been good so far for midcap and smallcap stocks. This month, BSE Midcap Index has fallen by 2.7 percent and Smallcap Index has fallen by 2.8 percent. For the second consecutive month, small and medium stocks are facing pressure.
New Delhi. Midcap and smallcap stocks, which were making a strong jump from March to October this year, have now ‘cooled down’. Between March and October, the BSE Midcap index had risen by about 21 per cent and the Smallcap index by about 25 per cent. But, now the midcap index has fallen by about 2.7 percent in the first fortnight of December, which is the biggest fall in a single month after February 2025. At the same time, a weakness of 2.8 percent has been recorded in BSE Smallcap Index during this period. This is the second consecutive month when smallcap stocks have seen a decline. On the contrary, the main market indices Sensex and Nifty have registered a gain of about 1% each.
On one hand, there is strong selling pressure in midcap and smallcap stocks, while frontline i.e. largecap stocks have shown strength. This decline in mid and small cap stocks has come at a time when the earnings growth of companies has improved and the balance sheet looks stronger than before. Market experts say that the trend of investors has shifted from risky stocks towards safe options. Second, investors are selling mid and small cap shares to book profits. By this they are showing weakness.
Why increased selling?
According to a report by Moneycontrol, according to Anirudh Naha of PGIM India Asset Management, the unwinding of positions related to margin trading facility in the market has increased the selling pressure. As soon as the process of reducing risk started in the market, the first impact was on midcap and smallcap stocks. By the end of November, the difference between the returns of largecap and smallcap stocks had increased to about 18 percent. Experts believe that after 2008 such difference has been seen very rarely. After the tremendous rise in midcap and smallcap stocks between March 2025 and October 2025, a slight slowdown is not considered unusual for the market.
Small and medium shares are still expensive
Despite the fall, the valuation of these shares still remains high. The BSE Midcap index is currently trading at around 25.23 times one-year forward earnings, which is much higher than its 10-year average of 23.29 times. Similarly, the Smallcap index is also at 22.6 times forward earnings, while its long term average is around 18.97 times.
