Dixon Tech, GRSE, BSE: Small, midcap stocks bleed in trade; indices slump 20% from record high; here’s all you need to know

NIFTY mid-cap 100 and small-cap 100 index fell another 3% on Wednesday after a sharp fall on Tuesday. The broader market indices, which had seen a sharp rally in the past few years, have corrected nearly 20% from the record highs. After the sharp rally from the Covid-19 lows, the broader indices have gained nearly 5x, adding investor optimism in the broader category of the market.

Similarly, the small-cap 100 index's top gainers were stocks like Aegis Logistics, Garden Reach Shipbuilders, Firstsource Solutions, and Glenmark Pharmaceuticals, which gained up to 100% in the past year. These top-gaining stocks have corrected up to 50% from their record-high levels.

Rich valuations

The broader market stocks, which are widely known for their growth and momentum, have seen fierce selling in recent months. The sharp correction can primarily be attributed to the high valuations of the stocks. The mid-cap 100 index at the peak levels had a price-to-earnings (PE) valuation of above 45x, which was at historic high levels. Similarly, the NIFTY small-cap 100 witnessed record-high valuations of 36x PE as compared to 28x.

Muted sequential earnings

Out of the 100 companies in the NIFTY midcap 100, 72 have reported earnings to date. Overall earnings posted muted bottom-line growth at 4.2% QoQ. The top-line sales growth remained largely muted at 1.3% for the quarter. Similarly, the 62 companies from the small-cap 100 index also reported 1.8% QoQ growth in the bottom line and 6.8% QoQ growth in the top line.

Chart check

NIFTY Midcap 100

The midcap index has corrected nearly 19% to 50,431 from the record-high of 60,925 achieved in September 2024. The index broke the weekly 20 SMA levels in the first week of January 2025, giving a bearish signal for the near term. Currently, markets are trading at the levels of April 2024. Market participants expect a bounceback from the current 55,971 levels on weekly charts.

NIFTY small-cap 100

The NIFTY small-cap 100 index has corrected nearly 6.5% in the current week and is currently trading at 15,930 levels. The index broke the weekly 20 SMA levels in the first week of January 2024, indicating a near-term bearish outlook for the markets.