The Nifty Smallcap 100 Index fell nearly 3 percent in November as investors turned cautious despite strength in large-cap benchmarks.
Many small-cap stocks were trading at stretched valuations which left limited scope for growth and triggered broad-based selling pressure among investors.
Small-cap companies posted only about 1.5 percent growth in consolidated net profits in Q2 FY26 while midcaps and largecaps reported much stronger earnings.
Foreign Institutional Investors sold nearly Rs. 17,500 crore in November which sharply reduced liquidity and impacted small-cap stocks the most due to higher risk.
Profit booking after the sharp 2024 rally pushed investors toward safer large-cap stocks which increased selling pressure in small-caps across multiple sectors.