We might just be at this stage now.
Discounting the rise in NIFTY SML 100 from 8500 level to 9500 between mid Dec 2017 and mid Jan 2018 - let us take the level of 8500 as the top (assumption being the final spike was all froth). From this level, the NIFTY SML 100 is now 20% down, the 2 year return on this index is below 10% and going by how the last 3-4 days have panned we may well get to negative territory on the 2Y return soon enough.
Small and micro caps are now undesired words, increasingly seeing people speaking in tones of “well managed large companies like HDFC Bank and TCS are better bets over the long term over any period of time”. People are now comparing the last 1 year return of small cap category with the 10 year track record of a large cap fund and asking questions about whether small and mid cap categories are really worth looking at. From fear of missing out we now have fear of investing, FD return of 7-8% does not appear all that bad any more
While further downside is a good possibility, expected 3 year return from the current levels are looking interesting. Do your own thinking and decide at what level does one want to start deploying more money (assuming you have any left in the first place!)
Edit: Looking at the buy/sell volumes on some small cap counters (at least the ones I own), sell orders are 50-100% higher than the buy volumes since yesterday. The pressure on the downside appears to be too high, I would not be surprised if we see a 5%+ cut in the small cap index from current levels which more or less ties in with the level needed for 2Y negative returns. Time to get our shopping lists out soon, this is still the time to be choosy and steadily allocate - not yet time to get aggressive and go all out