Multi-bagger small-cap stocks crash up to 43% in a month
What's the story
The Indian stock market has seen a brutal fall in small-cap stocks, which were once its star performers.
The fall, which started as profit booking in October, has only worsened with lackluster earnings and rising global tariff tensions.
In the last one month alone, 22 stocks from the Nifty Smallcap 250 index have seen a sharp fall of 20% to a mind-boggling 43%.
Market underperformers
Newgen Software leads the downturn with 43.4% plunge
Newgen Software has been the worst hit in this downturn, with its share price crashing 43.4% from ₹1,626 to ₹1,020.
The steep fall came after the company reported disappointing results for the December quarter, prompting several brokerage firms to cut down their target multiples.
Other small-cap IT stocks such as Netweb Technologies and Sonata Software have also lost 36% and 23%, respectively, in a month.
Earnings impact
Kaynes Technology and Apar Industries face steep declines
Kaynes Technology's stock price plummeted 39% after its Q3 earnings missed Street expectations. The company's management also slashed its FY25 revenue guidance from ₹3,000 crore to ₹2,800 crore, adding fuel to the fire.
Apar Industries also witnessed a 37% drop in its share price after weak Q3 results prompted Japanese brokerage firm Nomura to cut its target price for the stock.
Sectoral slump
Railway and capital goods stocks bear the brunt
Railway-related stocks like Jupiter Wagons, Ramkrishna Forgings, and Titagarh Rail Systems have also been affected by this fall, with losses extending up to 36%.
Capital goods stocks such as BEML, Triveni Turbine, and Elecon Engineering are witnessing heavy selling pressure due to weak December quarter earnings and reduced capital expenditure allocations in the Union Budget 2025.
Most stocks in this sector are trading at multi-month lows.
Market correction
Other multibagger stocks also face significant declines
Other high-performing stocks like Sterling and Wilson, Motilal Oswal Financial Services, India Cements, Techno Electric & Engineering, Swan Energy, Praj Industries, Vedant Fashions, CDSL, NCC, Data Patterns India and Welspun Living have also witnessed massive falls.
Despite this market correction all 22 of these stocks have earlier given stellar returns in recent years.
Some still trade with significant gains even after the brutal correction.
Expert views
What should investors do?
"The significant trend in the ongoing bearish phase of the market is the outperformance of large caps over the broader market. While the Nifty Midcap and Smallcap indices are down 8.6% and 11.3%, respectively, YTD, the Nifty is down only 1.52%," said Dr V.K. Vijayakumar, Chief Investment Strategist, Geojit Financial Services.
"What investors have to do now is to buy quality large caps in banking, IT, autos, pharma, and capital goods and wait patiently," he added.