Why are mid & small-cap stocks tumbling in 2025? Here are 5 key factors behind the decline The Nifty Midcap 150 index has tumbled by 7%, while the Nifty Smallcap 250 index has plunged by 9% in 2025. In stark contrast, Nifty 50 has shown relative resilience, slipping only about 2%.
Why are Mid & Small-Cap Stocks Tumbling in 2025?
In 2025, the Indian stock market has witnessed a significant downturn in mid and small-cap stocks. The Nifty Midcap 150 index has plummeted by 7%, and the Nifty Smallcap 250 index has taken a sharper dive of 9%. Meanwhile, the Nifty 50 has displayed relative resilience, slipping just about 2%. What’s behind this disparity? Here are five key factors contributing to the decline.
1. Economic Slowdown
The Indian economy is grappling with a slowdown, affecting consumer spending and overall business growth. Mid and small-cap companies, often reliant on domestic demand, are feeling the pinch more acutely than their larger counterparts.
2. Rising Interest Rates
The Reserve Bank of India has been increasing interest rates to combat inflation. Higher borrowing costs have a more pronounced impact on smaller firms, making it harder for them to finance operations and expansion plans.
3. Global Market Volatility
International markets have been turbulent, with geopolitical tensions and fluctuating commodity prices. This uncertainty leads to reduced foreign investment in Indian mid and small-cap stocks, further exacerbating their decline.
4. Profit Taking by Investors
After a robust rally in the previous years, many investors are now cashing out. The profit-booking trend is more visible in mid and small-cap stocks, where the potential for quick gains often attracts more speculative trading.
5. Shift in Investment Preferences
Investors are increasingly favoring large-cap stocks, which are perceived as safer bets during uncertain times. This shift results in a decrease in demand for mid and small-cap stocks, contributing to their downward trajectory.
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