The year 2025 has proven to be one of the most challenging periods for small-cap stocks in recent memory. This segment of the Indian equity market, which had previously delivered spectacular returns, is now grappling with intense selling pressure, shrinking valuations, and a significant decline in investor risk appetite. The dramatic reversal has left many retail investors wary and has visibly dampened market sentiment across the board.
A Sharp Reversal After Stellar Gains
The current weakness marks a stark contrast to the runaway bull run witnessed in previous years. The small-cap index had skyrocketed by an impressive 56% in 2023, and it managed to sustain that momentum with a further strong gain of 24% in 2024. However, the tide has turned decisively in 2025.
The pressure is clearly reflected in the benchmark indices. The Nifty Smallcap 100 has declined by more than 9% since the start of the year (year-to-date). This underperformance is particularly notable as large-cap stocks continue to hold their ground and dominate the current market cycle. The pain for small-cap investors is not limited to the year-long view; the index has also fallen nearly 7% over the past six months and about 6% in the last one month alone.
Expert Outlook: A Cyclical Recovery Expected in 2026
Despite the gloomy present, market experts believe this phase may be cyclical. Sushant Bhansali, CEO of Ambit Asset Management, suggests a revival is on the horizon for 2026, contingent on certain economic conditions. "The probability of a cyclical revival in 2026 is high if earnings in the broader market stabilise, domestic SIP flows remain sticky and global rates peak out—thereby lowering the risk-free anchor," Bhansali stated.
He, however, cautioned that the recovery will likely be selective. "Leadership within small caps is likely to be narrower: expect the quality-led small/mid segment to recover first, while over-leveraged names may continue to underperform," he added, advising investors to focus on fundamentally sound companies.
Defying the Downturn: Five Multibagger Small-Cap Stars of 2025
In a striking contradiction to the broader segment's weakness, a handful of small-cap stocks have not just survived but thrived, delivering extraordinary returns to their shareholders. Here are five such multibaggers that have soared over 150% in 2025:
1. Cupid Ltd: This stock emerged as the top performer, staging a phenomenal rally of over 490% in 2025. The manufacturer of condoms, lubricants, and diagnostic kits saw its stock surge 380% in six months, 108% in three months, and 36% in one month.
2. Indo Thai Securities Ltd: The financial services firm logged multi-fold returns, climbing 182% year-to-date in 2025. Strong retail participation and corporate actions like a stock split fueled the rise. It gained 93% in six months and 70% in three months, though it corrected 17% in the past month.
3. Force Motors: The Pune-based automotive company gained 175% in 2025, showcasing resilient investor confidence. Its journey has been volatile recently, with gains of 25% in six months, a dip of 4% in three months, and a slight rise of 2% in one month.
4. NACL Industries: This chemical sector player delivered returns of 174% in 2025 YTD as investors rewarded its steady fundamentals. However, it has faced recent selling pressure, falling 13% in six months, 35% in three months, and 17% in one month.
5. SML Mahindra: The commercial vehicle manufacturer, backed by the Mahindra group, rallied 162% in 2025. It jumped 103% in the last six months and added 28% in the past month, despite a minor 2% dip over three months.
The divergent performance within the small-cap universe underscores the critical importance of stock selection. While the broader segment awaits a potential recovery in 2026, these multibaggers demonstrate that opportunities persist even in a tough market for those who spot resilient businesses with strong fundamentals.
