BSE Smallcap: The Jan-Mar Pattern
The current fall in stock prices, while not catastrophic, has made a lot of investors very nervous. In this piece, we look at some historical data to understand how Indian markets have typically gone through a period of weakness in Jan–Mar, only to recover meaningfully in the Apr–Jul period. We also share some qualitative perspectives on where Indian markets stand today.

Year by Year Data of BSE SmallCap Index 

Year	Oct-Mar Peak	Jan-Mar Trough	Apr-Jul Peak	% Fall	% Rise	Remark
2013	7,657 07-Jan-13	5,727 25-Mar-13	6,199 17-May-13	-25%	+8%	-
2014	7,072 31-Mar-14	N/A	10,571 07-Jul-14	N/A	+71%	Modi 1st Term
2015	11,529 03-Mar-15	10,441 27-Mar-15	11,942 13-Apr-15	-9%	+14%	-
2016	11,941 01-Jan-16	9,548 29-Feb-16	12,310 29-Jul-16	-20%	+29%	-
2017	14,434 31-Mar-17	N/A	16,099 26-Jul-17	N/A	+34%	-
2018	20,047 15-Jan-18	16,801 23-Mar-18	18,402 30-Apr-18	-16%	+10%	MF Rules & LTCG Tax
2019	15,027 29-Mar-19	N/A	15,172 16-Apr-19	N/A	+16%	-
2020	14,850 27-Jan-20	8,873 23-Mar-20	13,022 31-Jul-20	-40%	+47%	COVID Crash
2021	21,254 04-Mar-21	N/A	26,787 30-Jul-21	N/A	+49%	-
2022	31,140 17-Jan-22	25,391 24-Feb-22	29,880 11-Apr-22	-19%	+18%	Ukraine-Russia War
2023	29,987 14-Dec-22	26,159 28-Mar-23	35,002 31-Jul-23	-13%	+34%	-
2024	46,485 07-Feb-24	40,642 13-Mar-24	55,412 30-Jul-24	-13%	+36%	-
2025	57,703 11-Dec-24	42,780 03-Mar-25	55,639 17-Jul-25	-26%	+30%	USA Tariffs Start
2026 *	53,876 31-Oct-25	46,825 13-Mar-26	-- unfolding	-13%	watch Apr-Jul	US-Israel-Iran War

Pattern Consistency: In 8 out of 12 full years (2013-2025), the BSE Smallcap corrected from an Oct-Mar peak to a Jan-Mar bottom, with falls ranging from −9% to −40%. In each of these years, the Jan-Mar sell-off was followed by a meaningful bounce in Apr-Jul, ranging from +8% to +71% from the bottom, and in most cases comfortably exceeding the preceding Jan-Mar loss. These are just statistical observations. Macro triggers —elections, interest rates, FII flows, tariffs, wars, fiscal deficits, techonological disruptions — vary each year. These patterns may not have any logic to recur repeatedly during similar times of the year. Understanding the context is more important. 

2025–2026: The First Long-Term Correction After COVID
The BSE Smallcap Index made a peak of around 57,703 in December 2024, fell to 42,780 by March 2025, recovered to 53,876 by October 2025, and is now back down to 46,825 as of March 2026. This is a period of almost 15 months. The fall in Jan-Mar 2026 is actually just 13%, much lower than the 26% fall in Jan-Mar 2025 from peak to bottom. However, the nervousness in 2026 in the air feels much more.

If you measure the fall from the December 2024 peak over these 15 months, the BSE Smallcap index is down roughly −19%. But if you measure investor nervousness, it feels far deeper than the numbers suggest. Part of this can be explained from what you find when you dig further into the data.

The fall is far more severe in the smaller market cap segments — where more than 2,500 companies have declined more than 30% from their respective 15–18 month peaks. The index number softens the blow; individual stock prices give a far better feel of the story. 

In terms of story, where are we and what lies ahead? 

1. India high valuation led to a tremendous paper supply
The last three years have seen an extraordinary supply of new paper hitting the Indian equity markets. An excessive number of IPOs, secondary market fund raises through QIPs, and promoter selling created a massive supply overhang that the market had to absorb. What was more notable was that global businesses, which would never have considered listing in India a few years ago, were suddenly lining up.

Indian investors' love of MNC stocks—where they might expect delisting—led to unheard-of stake sales, as their global parents found Indian valuations so appealing that they could not resist offloading some shares.

Everyone knew that the Indian markets were expensive. But since this had been going on for so long, it was difficult for most to time the market. Investors thought that these valuations were the norm. Many investors who recognised the overvaluation chose not to act on it—because calling the top and re-entering at the bottom is also extremely difficult, and sometimes it is better to ride out the correction than to try to time it.

2. Geopolitical headwinds have stacked up simultaneously
Trump tariffs have not just disrupted trade flows — they have fundamentally altered the global economic order and changed the course of supply chains substantially. Every major capable country is now actively looking to de-risk itself in key sectors, and re-calibrating alliances and co-operation frameworks are emerging as a result.

The post-2020 world has also seen a series of new wars across countries — and, funny enough, the United States seems to be a party in almost all of them.

The most recent is the US–Iran conflict, which has led to elevated energy costs from Middle East tensions. Individually, each variable adds the caution list. Together, they have amplified the anxiety among investors.

3. The AI technology challenge
The AI & technology challenge has added a genuinely new layer of uncertainty and worry. Fears around AI and robotics disrupting industries are real — but investor concern is less about disruption itself and more about the downstream effects: job displacement, slower income growth, and the possibility that India could miss its share of the AI-led earnings boom. India's dependence on energy imports, and the challenge of sustaining income growth for a large population in an AI-driven world, represent a new long-term risk that markets are now beginning to price in.

From a broader perspective, it is reasonable to believe that human ingenuity will ultimately prevail. People will find ways to adapt and benefit from new technology. Yes, certain jobs will be displaced and income growth in some sectors will face pressure — but history suggests that equally large, if not larger, opportunities tend to emerge and offset the disruption. That is a very plausible and well-grounded view.

However, what the actual outcome of these risks turns out to be — well, we will only know a couple of years from now. The stock market, though, does not wait for answers. It is a place where investors can price anything and stretch their imagination in any direction. After all, thinking is free — there is no tax on it. And right now, the mood is firmly tilted towards pricing the worry.

4. The March Portfolio Cleanse: India's Favourite Ritual
There is one technical factor that deserves special mention — and a small smile. Every March, a sizeable chunk of individual investors decide it is the perfect time to "clean up" their portfolios. Not because they have a well-thought-out strategy, but because the Indian tax year ends on 31st March. Now, these are the same investors who would usually not sell a stock at a loss due to their loss aversion bias. But come February–March, the advance tax deadline makes them change their mind. 

This behaviour where thousands of investors simultaneously dumping stocks in March creates real and measurable selling pressure, more so in a negative sentiment environment. Everyone doing this at the same time amplifies the fall. This tax loss harvesting may be individually sensible in some cases but is collectively quite counterproductive.

5. FII Outflows & the Depreciating Rupee
From a money flow perspective, the Indian rupee depreciation in this current period has been notably higher than what has been historically typical for the Indian rupee over the long term. The high valuation of Indian stock market, lack of AI related opportunity in India vs some other global markets and geopolitical uncertainity has made Indian assets temporarily less attractive to foreign investors, resulting in sustained and heavy FII outflows. 
Currency Table

Currency Pair	1 Apr 2024 (INR)	13 Mar 2026 (INR)	INR Depreciation
USD / INR	83.4	92.5	−9.9%
EUR / INR	89.7	107.0	−16.2%
GBP / INR	105.0	124.0	−15.3%
CNY / INR	11.6	13.5	−14.1%

6. Where Does Equity Stand Versus Other Asset Classes?
When you look across the four major asset classes over a 3, 5, and 7-year lens, the picture becomes clearer. Gold has materially increased and has been one of the strongest performers. Real estate in India has increased anywhere from 50% to 100% depending on the city and micro-market. Fixed income offers limited yields.

And equities have shown a reasonable correction and fall — which, relative to the other three, makes them comparatively more attractive than they were a year or two ago. It is also worth noting that contrary to Indian stock markets, other equity markets globally have done very well. 

 

Where Do We Go From Here?

Valuations in India have moderated. The mountains of global worry are visible and possibly already priced in. India's internal balance sheet is in much better shape than many of its peers. A large majority of stocks are now available at very reasonable prices. The India story remains structurally intact. And other asset classes are already at relatively elevated levels.

Taken together, the environment feels increasingly conducive to the view that 3–5 years from today, we will be materially better off than where we stand now — with one important caveat.

The AI risk remains an open question. Unlike geopolitical tensions or currency moves, where history offers at least some reference points, the scale and speed of AI-driven disruption is genuinely new territory. This is not a reason for pessimism, but it is a risk that deserves to sit separately from the usual list of macro worries. It could cut either way, and by a significant margin.

And yes, tactically, if the Jan–Mar pattern stays true to form, the good times may be nearer than they appear. The data has been forgiving, even after the worst of years. 

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