Nifty Midcap Makes Brief Recovery As SmallCaps Continue To See Pain On First Trading Session Of March

On March 3, Indian stock market investors witnessed some relief as key benchmark indices closed flat with a slight negative bias. The Nifty 50 closed at 22,119.3 levels, down by 5.4 points or 0.02 per cent and the 30-share benchmark Sensex closed lower by 112.16 points or 0.15 per cent at 73,085.94.

In the previous trading session on February 28, the markets witnessed signs of bearishness as the Sensex and Nifty declined by 1,414.33 points and 420.35 points respectively.

Here’s a look at how the broader markets fared in the first trading session of March:

Nifty Midcap Snaps 6-Day Losing Streak

Amid the benchmark indices closing flat, the Nifty Midcap 100 managed to break its six-session losing streak in which it declined 6.34 per cent between February 20 and February 28. On March 3 the index closed in the green zone at 47,984.15 levels, up by 0.14 per cent. Tube Investments of India Ltd, Supreme Industries Ltd and Prestige Estates Projects Ltd emerged as top gainers among all constituents of the index as they closed up to 7.67 per cent higher.

Top constituents of the Nifty Midcap 100 index such as Max Healthcare Institute Ltd closed flat down by 0.52 per cent at Rs 973 apiece. Shares of other index heavyweights such as Indian Hotels Co. Ltd closed in the green at Rs 726.15 apiece up by 4 per cent and BSE Ltd shares closed 5.78 per cent lower at Rs 4,366 apiece on the NSE.

Nifty SmallCap 100 Goes Deeper Into Bear Territory

The Nifty SmallCap 100 extended losses for the seventh straight session on March 3. The index has shed 6.9 per cent in its seven-session fall from February 20 to March 3. The index closed in the red at 14,660.85 levels down by 0.27 per cent in today’s trade. At the current levels, the index is trading 25.64 per cent below its 52-week high of 19,716.2. Notably if an index or stock falls when the market falls 20 per cent below its peak, it's said to be in bear territory. With the seven-session decline, the index has deeper into bear territory.

On March 3 the broader market index witnessed 35 advances and 65 declines. Stocks of Angel One Ltd emerged as the top drag among the constituents of the index as it closed at Rs 1,979 apiece down by 8.77 per cent on the NSE. Other major losers included Tata Teleservices (Maharashtra) Ltd which declined 6.17 per cent at the close and Sterling and Wilson Renewable Energy Ltd which closed lower by 6.13 per cent.

Top index constituents by weightage such as the Multi Commodity Exchange of India Ltd dragged the index lower as it closed at Rs 4,725.8 apiece down by 5.33 per cent. Other key constituents such as Bluestar Co closed in the green at Rs 2,030 apiece up 5.86 per cent and shares of Laurus Labs Ltd closed at Rs 529.9 apiece up by 2.7 per cent.

Why Are SmallCaps Declining?

Investor sentiments are weakening amid continued selling by Foreign Institutional investors, weak global cues, political uncertainty around US President Donald Trump’s policy decisions, and liquidity concerns in small and midcap stocks. Factors such as earnings downgrades due to valuation excesses, continued weakness in the rupee due to foreign outflows and US trade tariff related uncertainties added to investor’s woes on March 3.

Notably the Indian rupee settled higher by 3 paise at Rs 87.34 against the U.S. dollar on March 3, 2025. FII selloffs continued as foreign institutional investors continued to remain net sellers, selling equities worth Rs 4,788.29 crore on March 3. FIIs have consistently remained net sellers for the past five months since October 2024.

Pawan Parakh, Fund Manager at Geojit Financial Services said that the steep decline witnessed by small caps and midcaps is normal relative to the decline seen in largecap stocks. However he added that the drying up of volumes on the buying side amid relentless FII selling has contributed to the sharp correction seen in the smallcap space.

“Its a normal market trend that SMIDs fall more than large caps in a downward market. This time is no different. However, now the market fall has extended onto its 6th month, which has led to a substantial decline in market volumes. While the FII selling is persisting, volumes on the buy side have dried which is leading to sharp corrections on low volumes,” Parakh said.