The shares of several smallcap and midcap companies dropped sharply on July 1, pushing the broader market indices into the red to snap a seven-day gaining streak. The smallcap and midcap indices are currently underperforming the benchmarks, after several consecutive sessions of outperforming them.
The Nifty Smallcap and Nifty Midcap indices dropped around 0.3 percent each to hover around 19,009 and 59,544 respectively in the afternoon. Notably, the broader market indices had seen significant surge in the recent days, with the market capitalization of the BSE Midcap index and BSE Smallcap index surging by a whopping Rs 2.45 lakh crore and Rs 3.41 lakh crore respectively in just seven sessions.
The sharp fall may come as investors resort to profit booking at elevated levels.
Top midcap losers:
Dixon Tech and NMDC shares were the top losers on the midcap index, dropping over 3 percent. Bharti Hexacom, Bharat Forge and Ola Electric Mobility shares tumbled nearly 3 percent each, while SBI Cards, Alkem Laboratories, Page Industries, Solar Industries and Mankind Pharma shares declined over 2 percent each.
CONCOR, Adani Total Gas, Bandhan Bank, National Aluminium (NALCO) and other midcap stocks also recorded significant losses.
Top smallcap losers:
On the smallcap index, Go Digit shares tumbled nearly 5 percent. International Gemmological Institute (IGIL), FirstCry, Welspun Living, Radico Khaitan, Inox Wind, Brigade Enterprises and other smallcap stocks meanwhile dropped up to 2 percent.
ABREL, Crompton, Welspun Living and others meanwhile rose over 1 percent each.
Also read: Our LIVE blog on stock market updates
According to Harshal Dasani, Business Head at INVasset PMS, this is a healthy correction. "After a strong seven-day uptrend, today’s pause in the broader market is a normal and healthy breather—not a sign of reversal," he said.
"Midcaps and smallcaps have been leading the recent momentum, and some consolidation was expected as they approach key technical zones. It’s important to step back and view today’s move in context. From September 2024 to mid-March 2025, the Midcap 100 corrected by nearly 22% and the Smallcap 100 by 28%, making it one of the sharpest drawdowns in recent years. That phase tested investor sentiment and flushed out froth from overheated pockets of the market. Since then, the recovery has been sharp and well-supported by improving macro indicators, resilient domestic flows, and early signs of an earnings revival. As of today, the Midcap 100 is just 2% away from its all-time high, and the Smallcap 100 is merely 3.5% below. These are not levels that indicate market exhaustion—they point instead to strength and resilience," he further said.
The broader market is positioning itself for a 'structural bull leg' over the next two years, Dasani added. "With political stability restored, global rate expectations softening, and India’s capex and credit cycles gaining traction, the foundation for long-term wealth creation remains intact. Temporary pullbacks like today should be viewed as part of a healthy trend, not something to be feared. Our view remains constructive on quality businesses, particularly in the mid and smallcap space, where earnings growth and valuation re-rating potential still look compelling," he said.
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