5 small-cap stocks have lost over 55% in 2025 so far. Is it a buying opportunity?

The Indian stock market has witnessed a steep correction in CY25, with the benchmark Nifty declining over 5 per cent, while the Smallcap index has suffered a more significant hit, plunging by 20 per cent in this period. The correction has been attributed to a combination of factors, including sustained foreign capital outflows, weak corporate earnings, and the rupee hitting record lows against the dollar.

Adding to the turmoil, investor sentiment has been dampened by fresh tariffs imposed by U.S. President Donald Trump, stoking fears of a potential trade war that could slow global economic growth and push inflation higher. The heightened uncertainty has led to a shift in investment preferences, with investors moving towards large-cap and balanced debt-equity funds, as highlighted by industry experts.

Sharp hit to small-caps

Several small-cap stocks have seen a sharp decline during this turbulent period. Let’s take a look:

Suratwwala Business Group has lost over 72 per cent in CY25, falling from ₹130 on December 31, 2024, to ₹36. The stock is nearly 75 per cent below its peak of ₹143.05, hit in October 2024. The small-cap stock has continued its downward trajectory, dropping 14 per cent in the first three sessions of March after declining 66 per cent in February and 9 per cent in January. Over the past year, it has eroded more than 56 per cent of investor wealth.

Jai Corp has plummeted 70 per cent this year, falling from ₹326.65 at the end of 2024 to ₹97.02 as of March 4. The stock remains 78 per cent below its peak of ₹438.00, reached in July 2024. While it gained around 8 per cent in March, it posted heavy losses in previous months, dropping 30 per cent in February, 58 per cent in January, and 10.6 per cent in December. Over the past year, the stock has lost 68 per cent of its value.

Vakrangee has seen a steep 62 per cent decline in CY25, dropping from ₹34.12 on December 31, 2024, to ₹13 as of March 4. The stock is now 66 per cent below its 52-week high of ₹38.17, recorded in January 2025. It has declined 42 per cent in February and 30 per cent in January, with a marginal 1 per cent loss in March. Over the last year, Vakrangee has wiped off 46 per cent of investor wealth.

Best Agrolife has suffered a 58 per cent decline in CY25, falling from ₹631.8 at the end of 2024 to ₹265.20 as of March 4. The stock is currently 65 per cent below its 52-week high of ₹756.50, recorded in April 2024. While it has gained over 4 per cent in March, it saw sharp losses of 50 per cent in February and 18 per cent in January. Over the past year, the stock has dropped 54 per cent.

Zen Technologies has declined 56 per cent in CY25, falling from ₹2,445.65 at the end of 2024 to ₹1,076.90 as of March 4. The stock remains 59 per cent below its 52-week high of ₹2,627.95, reached in December 2024. However, it has rebounded slightly, gaining 11 per cent in March after falling 40 per cent in February and 29 per cent in January. Over the last year, it has delivered a modest 12 per cent gain.

Should you continue to buy smallcaps?

The year has seen persistent selling pressure, particularly in small-cap stocks, prompting fund managers to adopt a more cautious approach. Abhishek Jaiswal, Fund Manager at Finavenue, emphasised the need for a stock-specific strategy when investing in the small-cap segment.

“The latest quarterly data reaffirms that small-cap stocks have outperformed large caps in market momentum and fundamental metrics. However, small caps tend to exhibit sharp movements in both directions, making valuation and liquidity key considerations. A well-balanced portfolio with a strategic allocation to both large and small caps ensures sustainable, less volatile returns,” he said.

Jaiswal also advised investors to track government policies, corporate earnings, and major global economic developments. “The foundation of wealth creation lies in disciplined entry valuations and a well-defined investment horizon,” he added.

Meanwhile, Pratik Gupta, CEO and Co-Head of Kotak Institutional Equities, noted a clear shift in investor preference from small- and mid-cap funds to large-cap and balanced debt-equity funds.

“Fund managers overseeing small-cap portfolios have turned more cautious due to stretched valuations and the risk of sudden redemptions leading to disorderly sell-offs. Domestic investors are also concerned about earnings downgrades, given weak management commentary from several companies at the Kotak Institutional Equities conference,” Gupta observed.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.