India’s BSE SmallCap index has turned into one of the weakest-performing global asset classes in 2025, underperforming equities, commodities, and even cryptocurrencies, as stretched valuations, weak earnings visibility, and low liquidity weighed heavily on investor sentiment.
The index has fallen over 11 percent in dollar terms so far in 2025, marking its sharpest annual decline in three years. This comes after an exceptional rally of 47 percent in 2023 and 26 percent in 2024, highlighting the sharp reversal in risk appetite. In comparison, benchmark indices such as the Sensex and Nifty 50 delivered muted gains of around 5 percent each during the year.
Global Underperformers in 2025
Apart from Indian small-caps, several other global assets also lagged in 2025. The Philippines’ PSEi index declined more than 9 percent, while Bitcoin slipped over 5 percent. Other laggards included the BSE MidCap index, which fell around 4 percent, and Indonesia’s Jakarta Composite Index, down nearly 0.4 percent.
Why Small-Caps Struggled
The correction in small-cap stocks coincided with:
- A weakening rupee
- Concerns around India-US trade negotiations
- Sustained foreign institutional investor (FII) outflows
- A global risk-off environment
- Heavy liquidity diversion toward large-cap stocks and a crowded IPO pipeline
These factors triggered aggressive profit-taking and prolonged selling pressure across the broader market.
Deep Damage Across the Index
The extent of the damage in small-caps remains significant:
- Nearly 90 percent of BSE SmallCap stocks are still trading below their 52-week highs
- About 10 percent of constituents are down 50–90 percent from their peaks
- Nearly 81 percent of stocks have declined 10–50 percent from recent highs
Despite large-cap indices hitting record levels, small-caps have struggled to stage a meaningful recovery.
Gold and Silver Outperform in 2025
In stark contrast, precious metals delivered standout returns in 2025. Gold and silver emerged as top-performing global assets, supported by geopolitical tensions, strong speculative inflows, and supply constraints, reinforcing their role as preferred safe-haven investments during periods of market stress.
Outlook for 2026
Market participants remain cautious on small-caps heading into 2026, as valuation comfort, earnings visibility, and liquidity conditions are yet to improve meaningfully.
Keywords: BSE SmallCap index 2025, smallcap stocks India, worst performing assets 2025, gold price 2025, silver price 2025, Indian stock market performance, global markets 2025, BSE MidCap, Sensex Nifty returns
