India's Small Caps Stumble, Retail Traders Feel the Strain

• India's small-cap stocks are significantly underperforming larger peers, causing strain for retail investors who dominate the segment.
• Retail investors are selling small-cap shares, with a net selloff of Rs 30,000 crore ($3.3 billion) this quarter, potentially the largest in over two years.
• The NSE Nifty Smallcap 250 Index is down nearly 9% in 2025, on track for its biggest yearly underperformance against the Nifty 50 in six years.
• High valuations (24x forward earnings vs. 18x average) and sluggish returns are contributing to investor impatience and bearish sentiment.
• Technical indicators show weakening momentum, with the smallcap gauge closing below its 200-day moving average for the first time since May.

Why It Matters: India's small-cap decline hurts retail investors, warning of broader market risks.