Small-caps under pressure! 19 stocks slide 5–30% this week, IEX leads decline

Indian Energy Exchange, Newgen Software Technologies, Reliance Power, and PCBL Chemical are among the small-cap stocks that have seen their share prices decline sharply so far this week, amid weak domestic cues, a tepid start to the June quarter earnings season, and persistent selling by overseas investors.

Overall, 19 constituents of the Nifty Smallcap 100 index have fallen between 5% and 30% this week, with Indian Energy Exchange (IEX) shares topping the list, having lost 30% of their value. If not for a 9% rebound in today’s session, the losses would have been even steeper.

The stock has been on a downward trend since July 16, with the decline accelerating in the previous session when it plunged 29.6%, its worst intraday fall on record, which came after the Central Electricity Regulatory Commission (CERC) approved the implementation of market coupling in the Day-Ahead Market (DAM), starting January 2026, in a phased manner.

This development also triggered rating downgrades from analysts, including Bernstein, which flagged the development as significantly negative for IEX. The brokerage cut its price target to ₹122 from ₹160, citing the loss of its price discovery advantage and the likelihood of reduced transaction charges due to increased competition.

Newgen Software was the second-worst performer, ending the last seven sessions in the red and losing 11.34% so far this week. The fall followed the company’s weak Q1 performance, which also led analysts to lower the target multiples for the stock.

Reliance Power also came under pressure amid multiple negative developments, including reports that the Enforcement Directorate raided several premises in Mumbai linked to Anil Ambani on Thursday, July 24, under the Prevention of Money Laundering Act (PMLA), along with a weak performance in the June quarter, resulting in a 11.3% drop in the value so far this week.

Likewise, shares of Atul declined by 5% after its EBITDA margin for Q1FY25 contracted to 15.93% from 16.89% in the same period last year. Other small-cap stocks, including Poonawalla Fincorp, Mahanagar Gas, Triveni Turbine, PCBL Chemical, KFIN Technologies, Aditya Birla Real Estate, PNB Housing Finance, and Natco Pharma, have also seen their share prices decline by over 6% this week.

Small-cap stocks: Is more downside ahead?

Small-cap stocks — the darlings of Dalal Street investors — seem to have lost their mojo this year, drifting lower even as broader markets manage to hold their ground. After years of stellar gains that pushed valuations to unsustainable levels, investors are now reassessing their exposure to these counters.

Analysts have long flagged expensive valuations in many small-cap names, and a tepid start to the June quarter earnings season has only strengthened expectations of another weak performance by India Inc. This, coupled with the return of foreign portfolio investor (FPI) selling in July, has intensified pressure on the segment.

After underperforming in the first half of the current calendar year, small-cap stocks have continued to face headwinds in July. The Nifty Smallcap 100 index has dropped 4% so far this month, compared to a 2.5% fall in both the Nifty 50 and Sensex.

The index has closed in the red in six of the last eight trading sessions. Analysts believe the pain in the small-cap segment may persist, given that valuations had become excessive and increasingly difficult to justify. In the March quarter, small-cap companies led the earnings downgrades, with FY2026 EPS estimates reduced by 6%, compared to a 2% cut for large caps and 3% for mid-caps.

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.