A ruthless sell-off on Tuesday sent shockwaves through the stock market, leaving investors in small- and mid-cap stocks battered and bruised. The BSE Small Cap Index bore the brunt of the carnage, plummeting 3.40 per cent in a single day. This latest blow has pushed the total losses for small-cap stocks to a staggering 18 per cent over the past two months. Mid-cap stocks also felt the full force of the sell-off, with the BSE Mid-cap Index tumbling 2.88 per cent on Tuesday. The Mid-cap Index has now plummeted 17.61 per cent in the last eight weeks.

The relentless sell-off has wiped out thousands of crores in investor wealth, with investors and analysts wondering when the bleeding will stop. With no clear end in sight, investors are bracing themselves for further losses, as the market turmoil shows no signs of abating. Many mutual fund schemes, especially small and mid-cap funds, are sitting on huge losses with their net asset values (NAVs) plummeting in the last two months. With investors increasingly wary of potential global trade disruptions in the wake of US President Donald Trump’s tariffs, the broader market faced a rout on Tuesday with the Sensex and Nifty falling 1.32 per cent – Sensex lost 1,018 points at 76,293.60 and the Nifty by 309 points at 23,071.80.

The market is under pressure as foreign investors have pulled out Rs 1,00,000 crore since January 2025, attracted by US bond yields at 4.49 per cent and a strong dollar — exacerbated by the rupee at 87 against the dollar.  On the other hand, Trump’s 25 per cent tariff on steel and aluminium could cut US steel imports by 80 per cent, increasing global surplus risks for India.

Analysts said volatility is likely until clarity emerges on Fed policy, Trump’s tariff plans, India-US trade talks, and a domestic valuation reset. “In this scenario, large caps and gold remain safer bets, so avoid knee-jerk reactions and keep a long-term view. The recent warning by a top fund manager against investing in small- and mid-cap caps also added to the selling pressure,” said an analyst. Ajit Mishra, SVP, Research of Religare Broking, said the bigger concern is managing positions in mid-cap and small-cap stocks, which are witnessing heavy selling and appear more vulnerable. “Traders should adopt a cautious stance, prioritising risk management in the current market environment,” he said.