

As investors respond to worries about the low corporate earnings in Q3FY25, mid- and small-cap stocks are seeing significant selling. Significant drops have been observed in the Nifty Midcap 100 and Smallcap 100 indices, which are indicative of continuing market corrections and investor sentiment.
Indian Stock Market: The Nifty Midcap 100 and Nifty Smallcap 100 indices saw sharp drops today, falling 2.5%, indicating that investors continued to pull money out of mid- and small-cap stocks for the third straight trading session on Friday, January 13.
This recent stock sell-off comes after worries that Indian Inc. might have another quarter of mediocre performance in Q3FY25. Although recent business updates from companies have indicated a moderate increase in their numbers, the market had expected a robust recovery from corporate India in Q3. This has sparked concerns that target multiple reductions and EPS downgrades may continue.

Indian Stock Market: The Nifty Midcap 100 and Nifty Smallcap 100 indices saw sharp drops today, falling 2.5%, indicating that investors continued to pull money out of mid- and small-cap stocks for the third straight trading session on Friday, January 13.
This recent stock sell-off comes after worries that Indian Inc. might have another quarter of mediocre performance in Q3FY25. Although recent business updates from companies have indicated a moderate increase in their numbers, the market had expected a robust recovery from corporate India in Q3. This has sparked concerns that target multiple reductions and EPS downgrades may continue.In a similar vein, the Nifty Midcap 100 index dropped 2% more to 54,622 on Friday, prolonging its losing run to a third consecutive day.
The index is currently down 5.71% from its January peak and has corrected by 4% over the last three trading sessions. Notably, from their respective December peaks, both indices have corrected by as much as 10.6%.
20 midcap and more than 35 smallcap stocks can drop as much as 20% in a single week.
Individual stocks: KEC International is the biggest laggard, followed by Inox Wind, Aditya Birla Real Estate, Five-Star Business Finance, Go Digit General Insurance, and PVR. Of the 36 stocks in the Nifty Smallcap 100 basket, 36 have lost between 10% and 19% of their value in the last week.
In a similar vein, 23 components of the Nifty Midcap 100 index saw losses ranging from 10% to 20% over the past week, with Kalyan Jewellers India suffering the largest loss at 20%. Other noteworthy stocks, such as CG Power and Industrial Solutions, Paytm, Aurobindo Pharma, Godrej Properties, and PB Fintech, came after it.
Since foreign investors have started selling Indian stocks again in the new year, the expectation of modest earnings is also depressing their mood. According to Trendlyne data, they sold ₹7,170 crore through exchanges on Thursday, bringing their total selling amount this month to ₹19,102 crore.
Investors are also being impacted by a number of other factors, including worries about a slowdown in the Indian economy, lower-than-expected Fed rate cuts in 2025, an anticipated increase in global inflation brought on by Donald Trump’s trade policies, a strong dollar that is crushing emerging market currencies, and a spike in crude oil prices.
49% of businesses are at risk of EPS reductions
An analysis by domestic brokerage firm JM Financial indicates that 49% of the companies in its coverage universe are at risk of EPS cuts in Q3FY25.
The brokerage stated, “Consensus expectations for the remaining companies appear overly optimistic, even though some of these companies have already seen EPS cuts following the release of business updates for the quarter.”
According to the brokerage analysis, 50% or more of the companies in 17 of the 32 subsectors are at risk of EPS cuts. PSU banks, consumer staples, automobiles and auto parts, cement, sugar, and city gas distribution are among the subsectors with at least 75% of businesses at risk of failure.
On the other hand, the brokerage determined that the only two industries where no EPS reductions are anticipated are diagnostics and consumer durables, with estimates either staying mostly the same or slightly increasing.
Disclaimer: This article contains the opinions and suggestions of individual analysts. These don’t reflect Mint’s opinions. Before making any investment decisions, we encourage investors to consult with qualified professionals.