BSE SmallCap index falls 11% in 2025, worst performer globally
What's the story
India's BSE SmallCap index has emerged as one of the weakest global assets in 2025, underperforming equities, commodities, and cryptocurrencies. The index has fallen over 11% in dollar terms this year, its steepest decline in three years. This comes after a stellar performance with gains of over 47% in 2023 and another 26% in 2024.
Market dynamics
Small-cap stocks' correction coincides with broader market trends
The correction in small-cap stocks has come amid a weakening rupee, worries over India's trade talks with the US, and continued foreign fund outflows. These factors have triggered a sharp risk-off reaction in the broader market. A risk-off global environment and an active initial public offering pipeline have further diverted liquidity toward large-cap stocks and other asset classes.
Future outlook
Small-cap stocks' underperformance likely to continue in 2026
Experts predict that the underperformance of India's small-cap stocks will continue into 2026. This is because these shares have failed to recover even as large-cap indices hit record highs. Nearly 90% of the BSE SmallCap index constituents are trading below their respective 52-week highs, with about 10% down between 50-90% from their peaks and a whopping 81% lower by between 10-50%.
Metal performance
Precious metals outperform all asset classes globally in 2025
Precious metals have outperformed all asset classes globally in 2025, with silver surging by a whopping 142% and gold jumping by 72%. The rally has been fueled by rising geopolitical tensions and expectations of further rate cuts. Central bank purchases and steady inflows into exchange-traded funds have supported this trend. Total holdings in gold-backed ETFs have increased every month this year except May, according to World Gold Council data.
Crypto trends
Bitcoin underperforms in 2025 amid ETF redemptions
Bitcoin, which had dominated performance tables for much of the past decade, has underperformed in 2025. Its weakness this year has been attributed to heavy ETF redemptions and a shift in investor focus toward AI-related stocks. Despite this setback, experts expect gold and silver to continue their upward trajectory into next year.