Is This A Pseudo Bear Market? Why Mid & Small Caps Are Under Pressure

Responding to concerns about a narrow rally in the Nifty and weakness in the broader market, experts call the current phase a 15–16 month consolidation, not a crash scenario. Unlike 2018–19, when names like DHFL, IL&FS, and Vakrangee created systemic solvency fear—today the balance sheets of corporate India, especially mid & small caps, are significantly stronger, reducing risk of deep declines. The pressure is coming from valuation cooling after a strong multi-year rally and heavy supply of IPO and primary equity paper, diverting liquidity away from secondary markets. While mid & small caps are correcting, the advice is clear: don’t sell in panic, as many future growth sectors are better represented in mid and small caps than in large caps.