The Nifty SmallCap 250 index has experienced its steepest decline since the onset of the Covid-19 pandemic, with a drop of 20% from its September high. The index is currently trading below 16,000, reflecting a broader market trend where small and mid-cap stocks are under pressure, as evidenced by a 3% decline in smallcaps and over a 1% drop in midcaps. The advance-decline ratio has fallen to a two-year low, indicating a significant loss in ground for these stocks. Analysts are questioning whether this downturn signals a bear market for smallcaps, which had previously been favored by investors. As the market grapples with these challenges, experts are evaluating potential recovery strategies and the implications of the upcoming 2025 budget, particularly for sectors like defense that may see increased government spending.