The midcap segment of the Indian stock market has been under intense selling pressure since the start of 2025, with February continuing the downward trend. The Nifty Midcap index recorded an 11% decline in February, following a 6% drop in January. This marks its worst monthly performance in nearly five years, since March 2020, when the index plunged over 30%.
On Friday, the Nifty Midcap index dropped over 1,650 points, or 3.3%, amid a broader market selloff. Meanwhile, the benchmark indices Nifty 50 and Sensex also shed nearly 2% during the session.
The correction in midcap stocks has been driven by lofty valuations and sluggish corporate earnings in the first half of FY25. Analysts have also pointed to external headwinds such as tariff-related uncertainties and foreign institutional investor (FII) outflows to China, which have intensified the downturn. Experts noted that weak earnings growth has failed to support the premium valuations midcap stocks commanded in previous quarters. Despite the continued market correction, many midcaps still trade at elevated levels, leaving room for further downside.
So far in 2025, midcap stocks have fallen nearly 17%, significantly underperforming the Nifty 50, which has declined over 6%. The Nifty Midcap 100 index has dropped more than 22% from its peak in September 2024, compared to a 13% fall in the Nifty 50.
