Smallcap Index Dips Nearly 3% in November as Nifty Hits Record Highs

November 2025 saw a striking contrast in the Indian stock markets. While large-cap stocks, led by the Nifty 50, continued their upward momentum and hit record highs, the small-cap segment faced broad-based selling pressure. Investors watched as the Nifty Smallcap 100 index slipped nearly 3%, highlighting a growing divergence between safer, large-cap bets and the riskier small-cap segment.

Market Performance: Nifty vs Smallcap

The Indian market narrative in November was defined by sharp contrasts:

• Nifty 50: Rose 1.8% during the month, continuing its record-breaking streak.
• Nifty Midcap 100: Gained 2%, supported by select institutional inflows.
• Nifty Smallcap 100: Fell nearly 3%, the underperformer among headline indices.

Institutional flows further amplified this divergence. Foreign Institutional Investors (FIIs) withdrew ₹17,500.31 crore from Indian equities in November, marking their fifth consecutive month of net selling. Domestic Institutional Investors (DIIs), however, maintained their buying streak, injecting over ₹77,000 crore, but their selective participation meant smaller companies bore the brunt of market pressure.

Smallcap Stock Movements

Among the Nifty Smallcap 100 constituents, the market painted a mixed picture:

• Gainers: 34 stocks managed positive returns for the month.
• Decliners: 66 stocks fell, reflecting broad-based profit booking and liquidity constraints.
• Top Performer: Jyoti CNC Auto, up 15%.
• Biggest Loser: Whirlpool India, down 28%.
• Other notable decliners: BEML, KEC International, Olectra Greentech, and Kaynes Technology, each falling over 15%.

These movements underline the volatility inherent in smallcaps, where earnings momentum and investor confidence can swing sharply within weeks.

Why Smallcaps Underperformed

Several factors contributed to the small-cap slump despite large-cap gains:

• Stretched Valuations: Many small-cap stocks were trading at elevated levels, leaving limited room for further gains without substantial earnings support.
• Weak Earnings Recovery: In Q2 FY26, small-cap earnings growth was muted. About 90 companies in the Nifty Smallcap 100 posted only a 1.5% growth in consolidated net profit, far below the 7%-8% growth seen in midcaps and largecaps.
• FII Selling Pressure: Lower liquidity and risk perception kept foreign investors away from smallcaps. Meanwhile, mutual funds favored midcaps, adding positions in 25 midcap stocks versus only 18 smallcaps over the past year.
• Profit Booking: After the euphoric rally in late 2024, smallcaps entered a year-long correction phase. With large caps reclaiming market leadership, capital gradually shifted away from smaller, riskier names.

Smallcaps: Looking Ahead

The correction has reset valuations and cooled excessive froth in the segment. While near-term volatility may persist, improving macroeconomic stability, easing inflation, and consistent domestic flows could support stabilization in smallcaps.

The performance of small-cap stocks in the coming months will hinge on:

• Strength and consistency of earnings growth
• Liquidity conditions in the broader market
• Rationalization of valuations compared to historical norms

Though under pressure in November, the small-cap segment could present long-term opportunities for investors focused on patient, high-conviction portfolios.

Summary:

November 2025 highlighted a clear split in the Indian markets: while large-cap indices soared, the Nifty Smallcap 100 fell nearly 3%. Stretched valuations, weak earnings, and selective institutional flows drove the decline. Out of 100 small-cap constituents, 66 closed the month lower, with Whirlpool India and BEML among the biggest losers.

The contrast between strong Nifty gains and small-cap weakness underlines the need for careful stock selection, even as market conditions gradually stabilize.