BSE SmallCaps Lag in 2025 as Gold and Silver Steal the Spotlight

India’s BSE SmallCap index has emerged as the weakest major asset class in 2025, underperforming equities, commodities, and cryptocurrencies amid stretched valuations, weaker earnings, and tight liquidity. Once a market favorite, the index is down over 11% in dollar terms this year—its sharpest fall in three years—after stellar gains in 2023 and 2024. In contrast, benchmark indices Sensex and Nifty delivered modest gains of around 5%.

The sell-off coincided with a weaker rupee, foreign fund outflows, trade-related concerns with the US, and a global risk-off environment that diverted liquidity toward large caps and other assets. Nearly 90% of BSE SmallCap stocks remain below their 52-week highs, reinforcing expectations that underperformance may persist into 2026.

Globally, precious metals dominated returns in 2025. Silver surged an extraordinary 142%, while gold climbed 72%, driven by geopolitical tensions, rate-cut expectations, strong central bank buying, and ETF inflows. Meanwhile, Bitcoin and select Asian equities also lagged, highlighting a clear shift in investor preference.

As small caps struggle, 2025 has reaffirmed gold and silver’s role as standout performers in uncertain times, reshaping global asset allocation trends.