Retail-Heavy Stocks Plummet as Market Selloff Deepens; Mid, Small-Caps Hit Hardest

• Indian stock market selloff is sharper in retail-dominated segments like mid-, small-cap, and SME shares compared to large-caps.
• BSE MidCap, SmallCap, and SME IPO indices have seen significant declines (5.8%, 8.1%, >10% respectively) since the year's start, marking their steepest monthly fall in nearly 12 months.
• The decline follows muted returns over two years, despite high inflows into mid- and small-cap mutual funds, leading to stretched valuations without corresponding earnings growth.
• Weakening macroeconomic conditions and geopolitical risks are driving a widespread derating, with investors rotating funds from smaller to larger, safer stocks.
• Analysts suggest that while the correction offers selective entry opportunities, volatility needs to subside for sustainable buying, and many mid/small-cap valuations remain elevated.

Why It Matters: Retail-heavy mid, small-cap, and SME stocks are bearing the brunt of a deep market selloff.