West Asia crisis hits SME stock exchange platforms hard

Chennai: SME stock exchange platforms are bearing the brunt of the West Asia crisis, leading to a sharp decline in listings and funds raised by SME firms. The ongoing geopolitical uncertainty has also prompted several SMEs to postpone their IPOs.

On a sequential basis, BSE SME saw a 73% plunge in funds raised (Dec 2025-Feb 2026 versus March-May 2026), while NSE Emerge recorded a 39% decline during the same period. According to Anand Chari, former additional general manager for SME and startup business development at BSE, BSE SME recorded 45 listings and raised Rs 1,890 crore between Dec 2025 and Feb 2026. NSE Emerge saw 25 listings and raised Rs 1,200 crore during the same three-month period.

In contrast, only 13 companies were listed on the BSE SME, raising around Rs 500 crore, while the NSE Emerge saw 12 listings and Rs 725 crore in fund raising between March and May this year.

On a year-on-year basis (March-May 2025 versus March-May 2026), BSE SME recorded a 6.8% decline in funds raised, while NSE’s SME platform, Emerge, witnessed a 10% increase in fundraising during the period.

“The West Asia crisis affects the Indian SME stock market mainly by creating uncertainty. Rising oil prices increase costs for small businesses, and since SMEs usually have limited financial resources, they get affected faster than large companies. Investors also become cautious during such situations, so SME stocks often witness greater volatility. Still, some sectors such as defence and renewable energy could benefit over time,” Chari said.

“Due to the West Asia crisis, investors are now preferring fairly valued companies with strong fundamentals and reasonable valuations. Companies coming at 10-12 times PE are still finding acceptance. We are also seeing continued interest from AIFs, banks and HNIs,” he added.

Noting that value buying is taking place only in companies that are relatively cheaper and fairly valued, he said, “I feel that in FY27, around 125 SME companies may get listed across both exchanges, representing nearly a 50% decline in SME listings compared with FY26.”

V K Vijayakumar, chief investment strategist at Geojit Investments, observed that many SMEs have postponed IPOs due to poor market conditions and weak sentiment despite having received approvals. He said the trend may persist until market conditions improve.

“In FY27, there is downside risk to India’s growth and upside risk to inflation. The Nifty is down more than 10% year-to-date, and market sentiment has turned negative. This has impacted the IPO market, both SME and mainboard. SMEs will be disproportionately affected during a crisis, and this is getting reflected in the IPO market as well,” he said.

Over the last 10 years, SME IPOs have performed exceptionally well, growing at a 46% CAGR compared with 29% CAGR for mainboard IPOs, he added.

Lalit Rathi, managing partner at LKR Advisors, said the current phase is a period of transition.

“India continues to have one of the strongest entrepreneurial ecosystems globally, and SMEs still require capital for growth. The revival will happen, but it will be very different from the previous cycle. The days when almost every SME IPO delivered massive listing gains are unlikely to return immediately.

“Going forward, capital will flow selectively towards businesses demonstrating profitability, governance standards and scalability. Stronger companies will continue to raise money successfully, while weaker stories may struggle. That is actually a positive development. A market driven by fundamentals rather than frenzy is healthier for long-term wealth creation and the credibility of the SME platform,” he said.