Indian Stock Market Crash: BSE SME IPO Enters Bear Territory

In the stock market, bear territory is when stock prices fall by 20% or more of their peak value. Today, on February 11th, the BSE SME IPO index has entered bear territory after outperforming most domestic and global indices for a long time.  

After touching a record high of 122,298 on January 6th, 2025, the SME IPO index has continuously declined since then, sliding to 95,553. 

This is the first decline for the BSE SME IPO index in the past four years as it registered a staggering 1,103 percent rise in 2021, a 43 percent jump in 2022, and a 96 and 147 percent rise in 2023 and 2024, respectively. 

Responding to this decline, market experts suggest that this was mainly due to sustained foreign investor outflow amid concerns of slow economic growth, weak corporate earnings, and a global tariff uncertainty that’s unfolding. They also suggest that this correction aligns with the broader market connection in India. 

Investors are advised to be cautious in this space as the trend is expected to go downward in the coming days. 

A point to be noted here is that SEBI had also issued an advisory to investors in the SME IPO space over potential risks after oversubscriptions recently. SEBI advised investors not to get swayed by overpromising returns, social media posts, and unsubstantiated rumors. 

When we take a look at the current scenario, more than 20 firms have been listed in the SME segment, with 10 trading below their issue price, and five of them remain unchanged. Of the 247 SMEs that got listed in 2024, 79 are now trading below their issue price, and another 24 are delivering returns in single digits. 

There were also a few SME IPOs that doubled on listing day itself back in 2024, and they have all erased gains now. Nearly 60 SME listings that clocked 10-90 percent gains are either trading flat or at a discount to the issue price. 

Owing to the current climate, research analysts and market experts suggest investors prioritize management quality, consistently profitable track record, substantial total addressable market, and a defensible business moat before investing in this space.