Midcap, smallcap stocks tumble up to 6%: BSE, Angel One, Lupin among top losers

Broader Market Buckles Under Pressure

The Indian equity market witnessed a sharp selloff in the midcap and smallcap segments on Monday, with several stocks registering losses of up to 6%. The downturn came amid heightened concerns over stretched valuations, mixed global cues, and rising volatility. Benchmark indices Nifty Midcap 100 and Nifty Smallcap 100 both slumped over 2%, significantly underperforming the frontline Nifty 50 and Sensex, which ended with marginal losses.

Among the most notable laggards in the mid- and small-cap space were BSE Ltd, Angel One, and Lupin, which plunged between 4% and 6% during the trading session.

Heavyweights in the Broader Market Dragged Down

BSE Ltd, the operator of Asia’s oldest stock exchange, emerged as one of the top losers in the midcap pack, falling nearly 6% to close at ₹2,445. The stock, which had seen a sharp run-up in recent months, is now under pressure as investors lock in profits amid valuation concerns and regulatory uncertainties surrounding its derivatives trading business.

Angel One, a leading retail brokerage firm, also lost ground, dropping more than 5% to ₹2,303. The stock has been volatile in recent weeks following SEBI's proposals on tighter norms for brokers, which could impact margins in the retail broking business.

Pharmaceutical major Lupin Ltd was another significant loser, sliding 4.2% to ₹1,655. Though the company reported robust earnings in the previous quarter, profit-booking and broader market weakness weighed on its stock.

Sectoral Impact and Volatility

The sell-off was broad-based across sectors, with the Nifty Midcap 100 and Smallcap 100 indices underperforming significantly. Market breadth tilted sharply in favor of declines, with nearly 3 stocks falling for every gainer on the NSE.

Sectors like capital goods, financial services, consumer durables, and real estate bore the brunt of the selloff. The Nifty Realty index dropped 3.1%, while Nifty Financial Services lost nearly 2.4%. Meanwhile, the India VIX — a measure of market volatility — surged by over 6%, signaling rising investor anxiety.

Analyst Views: “Time to Reassess Portfolio Risks”

Market analysts point to a mix of global and domestic factors fueling the correction.

“Valuations in the mid and smallcap space had become unsustainably high, and a correction was long due,” said Ajay Bagga, market expert and former banker. “Retail participation had pushed many stocks beyond their fundamentals, and now we are witnessing a return to sanity.”

Vinit Sambre, Head of Equities at DSP Mutual Fund, echoed similar sentiments:

“While the India growth story remains intact, it’s crucial for investors to be mindful of price-to-earnings multiples, especially in the broader markets. Earnings need to catch up for valuations to sustain.”

Global Cues Also in Play

The weakness in domestic mid and smallcaps also reflects nervousness in global markets. US bond yields have risen in anticipation of a delayed Federal Reserve rate cut, while geopolitical tensions in the Middle East and trade worries between China and the West are adding to the uncertain sentiment.

Investors are also closely watching upcoming US inflation data and Q2 earnings from Indian corporates, which could further sway market direction.

Mutual Funds and Retail Investors: The Key Drivers

Retail investors and domestic mutual funds have been key participants in the rally in midcap and smallcap stocks over the past year. According to AMFI data, smallcap mutual funds saw over ₹2,200 crore of inflows in June alone.

However, fund managers are now turning cautious.

“We are adopting a stock-specific approach and avoiding pockets where valuations have run up too fast,” said Ankit Jain, Portfolio Manager at Mirae Asset. “There is still value in certain sectors, but broad-based exposure to midcaps needs a relook.”

Technical Outlook and Support Levels

Technically, the Nifty Midcap 100 has broken below its 20-day moving average, indicating a short-term bearish trend. Analysts suggest that the next support levels are placed around 52,500 for the Nifty Midcap 100 and 16,500 for the Smallcap 100 index.

“We may see further pressure if these levels don’t hold. Investors should consider rebalancing and holding cash for better entry points,” said Ruchit Jain, Lead Research Analyst at 5paisa.

Investor Outlook: Caution, Not Panic

Despite the steep correction, most experts believe that this is not the end of the mid- and smallcap rally but a healthy and necessary consolidation.

Long-term investors are advised to stay invested but with selective stock picking and proper asset allocation.

“Corrections like these are opportunities for patient capital,” said Radhika Gupta, MD & CEO of Edelweiss Mutual Fund. “India remains a structurally strong story. This phase will shake out the froth and bring focus back to fundamentals.”

The steep drop in midcap and smallcap stocks serves as a reminder of the inherent volatility in broader markets. While the long-term narrative for India Inc. remains positive, especially amid improving macro fundamentals and domestic consumption, the short-term sentiment has turned cautious. Investors should tread carefully, avoid herd mentality, and focus on quality over momentum.