News Stocks Small-Cap Carnage: Nearly 500 Stocks Plunge 10-30% as BSE Smallcap Index Falls 9% in JanuarySmall-Cap Carnage: Nearly 500 Stocks Plunge 10-30% as BSE Smallcap Index Falls 9% in January
The BSE Smallcap index has declined 9% in January, double the Sensex's 4% fall, with nearly 500 small-cap stocks losing over 10% of their value. Investors have lost approximately ₹5.6 lakh crore during this market rout, with Balu Forge leading the decline at 34% due to income tax raids. Other major losers include Kiri Industries, Systematix Group, and Woth Investment (each down 33%), while Tejas Network fell 28% following quarterly losses. The sell-off has been driven by global trade concerns, geopolitical uncertainty, foreign institutional selling, and mixed earnings results.
*this image is generated using AI for illustrative purposes only.
The Indian equity markets have experienced significant turbulence in January, with small-cap stocks bearing the brunt of the selling pressure. The BSE Smallcap index has declined 9% on a month-to-date basis, substantially outperforming the benchmark Sensex, which has recorded a 4% loss during the same period. This divergence highlights the particular vulnerability of smaller companies during periods of market stress.
Market Impact and Investor Losses
The small-cap carnage has resulted in substantial wealth erosion for investors, with cumulative losses reaching approximately ₹5.6 lakh crore. The scale of the decline becomes evident when examining the broader participation in the sell-off across the BSE Smallcap index.
| Market Performance: | January 2025 (MTD) |
|---|---|
| BSE Smallcap Index: | -9.00% |
| Sensex: | -4.00% |
| Stocks Down 10%+: | ~500 companies |
| Total Red Stocks: | ~1,050 companies |
| Total Index Constituents: | ~1,300 companies |
Worst-Performing Stocks
Among the 483 small-cap stocks that have crashed over 10%, several companies have experienced particularly severe declines. Balu Forge emerged as the worst performer with a massive 34% decline, falling from ₹604.45 at the end of December to ₹397.90 as of the last closing price. The company, which is part of Ashish Kacholia's stock portfolio, has been impacted by income tax raids at its premises.
| Top Losers: | Decline (%) | Key Factor |
|---|---|---|
| Balu Forge: | -34% | Income tax raids |
| Kiri Industries: | -33% | Market conditions |
| Systematix Group: | -33% | Market conditions |
| Woth Investment: | -33% | Market conditions |
| Tejas Network: | -28% | Q3 FY26 losses |
| Godfrey Phillips: | -25% | Excise duty hike |
| Newgen Software: | -23% | Disappointing Q3 results |
Sector-Specific Challenges
Several companies have faced stock-specific challenges beyond the broader market weakness. Tejas Network, a Tata group company, has slumped to 52-week lows after posting a consolidated net loss of ₹196.55 crore in the third quarter of FY26, compared to a profit of ₹165.67 crore in the same period last year. Godfrey Phillips witnessed a sharp 25% decline following the government's excise duty hike effective next month. Newgen Software shares crashed 23% as investors expressed disappointment with the company's December-quarter performance.
Market Drivers and Outlook
The widespread decline has been attributed to multiple factors including risk-off positioning, concerns over global trade and geopolitical developments, and continued foreign institutional selling. The lack of an India-US trade deal and rising geopolitical uncertainty following tariff threats have shifted investor focus toward precious metals over equities. Additionally, a mixed earnings season has further dampened investor sentiment.
Valuation Perspective
Despite the correction, market experts suggest valuations remain elevated compared to historical averages. According to N. Aruna Giri, CEO of TrustLine Holdings, the small-cap index was trading at around 28-30x trailing earnings before the correction and has now moderated to about 25-26x, still representing a significant premium to long-term averages. However, selective opportunities may be emerging for bottom-up investors who exercise careful stock selection in this challenging environment.
Historical Stock Returns for BSE
| 1 Day | 5 Days | 1 Month | 6 Months | 1 Year | 5 Years |
|---|---|---|---|---|---|
| -2.26% | +3.26% | +6.42% | +12.46% | +56.47% | +4,180.03% |
