Fall from grace! 22 multibagger small-cap stocks crash up to 43% in a month amid selloff

Multibagger small-cap stocks: The once high-flying small-cap stocks, which seemed to have no limit to their rally, are now struggling to find shelter from the continued sell-off. Valuation concerns and weak December quarter performance have pushed many of these stocks to multi-month lows, with some even hitting one-year lows.

The fall in small-cap stocks, which started as profit booking in October, has deepened over the following months as earnings reports fell short of Street estimates, raising concerns over valuations. Additionally, escalating tariff tensions between global superpowers have unsettled investors, driving them away from risky assets and towards safe-haven investments. 

Foreign portfolio investors (FPIs) have been offloading shares at an accelerated pace in 2025, driven by concerns over steep valuations, global economic uncertainty, and signs of a slowdown in the Indian economy.

As a result, stocks that were once Dalal Street favourites have borne the brunt of the recent correction, leading to sharp losses in retail investors’ portfolios. Over the past month, 22 stocks from the Nifty Smallcap 250 index have plunged between 20% and 43%.

Newgen Software emerged as the biggest laggard, plunging 43.40% from ₹1,626 to ₹1,020. The stock saw most of its decline after the company reported a weak set of numbers for the December quarter, prompting multiple brokerage firms to trim their target multiples.

Despite delivering multibagger returns of 118% in 2024 and 333% in 2023, the stock has struggled to sustain its momentum, tumbling 40% so far in 2025. Other small-cap IT stocks, such as Netweb Technologies and Sonata Software, also declined by 36% and 23%, respectively, in a month.

Kaynes Technology witnessed a sharp fall after its Q3 earnings missed Street estimates. Additionally, the company’s management lowered its FY25 revenue guidance to ₹2,800 crore from the earlier projection of ₹3,000 crore, triggering further selling pressure. Over the past month, the stock has corrected by 39%. The stock had delivered stellar returns in recent years, pushing its valuations to extreme levels.

Another multibagger, Apar Industries, slumped 37% in a month after weak Q3 earnings prompted Japanese brokerage firm Nomura to cut its target price on the stock to ₹10,300 from ₹11,700 while maintaining its ‘buy’ rating. The stock had surged an impressive 2,900% between 2021 and 2024, but recent headwinds have led to a sharp correction.

Railway-related stocks, including Jupiter Wagons, Ramkrishna Forgings, and Titagarh Rail Systems, have fallen by up to 36%. Capital goods stocks, such as BEML, Triveni Turbine, and Elecon Engineering, have also witnessed heavy selling pressure.

Apart from valuation concerns and weak December quarter earnings, lower capital expenditure allocations in the Union Budget 2025 have further dented investor sentiment toward capital goods stocks, resulting in the majority of stocks in this space trading at multi-month lows.

Other multibagger stocks, such as Sterling and Wilson, Motilal Oswal Financial Services, India Cements, Techno Electric & Engineering, Swan Energy, Praj Industries, Vedant Fashions, CDSL, NCC, Data Patterns India, and Welspun Living, have also faced significant declines.

Notably, all 22 of these stocks have delivered multibagger returns in recent years, and despite the sharp correction, some continue to trade with substantial gains.

Mid and small-cap valuations still appear stretched

Dr V.K. Vijayakumar, Chief Investment Strategist, Geojit Financial Services, said, “The significant trend in the ongoing bearish phase of the market is the outperformance of large caps over the broader market. While the Nifty Midcap and Smallcap indices are down 8.6% and 11.3%, respectively, YTD, the Nifty is down only 1.52%. This outperformance is likely to continue going forward.”

“The relentless selling by FIIs in large caps has made their valuations fair while the valuations of mid and small caps continue to be excessive. FIIs will certainly turn buyers in India, but that will happen only when the dollar index turns weak. We know that it will happen but don’t know when. What investors have to do now is to buy quality large caps in banking, IT, autos, pharma, and capital goods and wait patiently. When FIIs turn buyers in India, which is inevitable, they will be buying the large caps that they are selling now. For patient investors, this is a good opportunity,” added Vijayakumar.

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.