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Business News/ Markets / Stock Markets/  Bears tighten grip on D-Street: Nifty 50, Sensex log worst session in 2 months; small, midcaps' worst in 2 years
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Bears tighten grip on D-Street: Nifty 50, Sensex log worst session in 2 months; small, midcaps' worst in 2 years

The Nifty 50 declined 1.51 per cent to 21,997.70, closing below the 22,000 mark for the first time this month. The 30-share BSE Sensex settled 1.23 per cent lower at 72,761.89 by the end of the session.

People watch a large screen displaying India's benchmark share index on the facade of the Bombay Stock Exchange (BSE) building in Mumbai. REUTERS/Punit Paranjpe (INDIA)Premium
People watch a large screen displaying India's benchmark share index on the facade of the Bombay Stock Exchange (BSE) building in Mumbai. REUTERS/Punit Paranjpe (INDIA)

Bears tightened their grip on D-Street as domestic equity benchmarks Nifty 50 and Sensex logged their worst session in over two months and the domestically-focused small-and midcaps witnessed their worst session in over two years on March 13. The market capitalisation of BSE-listed companies erased by 13,47,822.84 crore to 3,72,16,602.67 crore.

Investors lost around 13.5 lakh crore in a single day on Wednesday. The bloodbath in equity markets came one day after India reported its retail inflation figures for February which eased to 5.9 per cent, while the US reported a slight uptick in consumer prices last month.

US inflation data has raised concerns that Jerome Powell-led US Federal Reserve may postpone cutting interest rates in June over achieving its inflation target of two per cent. This also led foreign investors dumping Indian shares today with the total outflow by foreign institutional investors (FIIs) coming in at 4,595 crore, according to NSE data. 

Also Read: OMC stocks plunge 4-6% as markets crash 1%; brokerage suggests ‘sell’ on IOC, HPCL: Why are prices discounting?

Domestic institutional investors (DIIs) instead bought 9,094 crore in Indian equities, but that could not stabilise the larger selling pressure today witnessed across counters. The Nifty 50 declined 1.51 per cent to 21,997.70, closing below the 22,000 mark for the first time this month. The 30-share BSE Sensex settled 1.23 per cent lower at 72,761.89 by the end of the session.

Sell-off in small-and midcaps

Broader markets took the worst hit as small- and mid-caps plunged even steeper by 5.28 per cent and 4.40 per cent respectively, extending their losses over long valuations. Experts have also flagged concerns over markets being in a bubble zone.

This came after capital markets regulator Securities and Exchange Board of India (SEBI) chairperson Madhabi Puri Buch earlier this week raised concerns over stretched valuations of small- and mid-cap stocks, which are generally favoured by retail investors through monthly purchases to mutual funds built around such investment themes.

“There are pockets of froth in the market. Some people call it a bubble, some may call it froth. It may not be appropriate to allow that froth to keep building,'' said Buch, according to reports. Worried about large inflows into small- and mid-cap funds, SEBI has asked mutual funds to conduct stress tests on mutual funds and disclose results by Friday.

Also Read: Nifty Smallcap 100 index slides 5.3%, 98 stocks close in the red

Dr. V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services said, ‘’In the near-term investors should focus on the sustained weakness in the broader market, particularly the Smallcap segment. The excessive valuations in these segments driven by the irrational exuberance of retail investors has been a concern for many months now.''

‘’But it has taken the strong message from the regulator SEBI to trigger a correction in the Nifty Smallcap index by 10 per cent from the February 8th peak. It is important to understand that 396 stocks are in the lower circuit indicating that there is more pain to come in this segment. Actions from mutual funds also indicate the excessive valuations in the broader market,'' added Dr. V K Vijayakumar.

ICICI Prudential Life Insurance has joined two other leading funds in stopping lump sum investments in their mid and smallcap schemes. More are likely to follow. The net impact of this shift would be more money flowing into large caps, according to market experts.

What should investors do? Experts weigh in

Ajit Mishra, SVP - Technical Research, Religare Broking Ltd said, ‘’It is a double whammy for participants as Nifty has slipped below its immediate support of short-term moving average i.e. 20 DEMA and also breached the trendline support while midcap and smallcap space are already under tremendous pressure.''

Also Read: What lies ahead for SME IPOs after SEBI remarks on price manipulation? Experts weigh in

‘’We suggest maintaining negative bias in the index now and utilizing rebound to create short positions. At the same time, traders shouldn’t add to their loss-making positions and prefer index majors over others,'' added Mishra.

On the small-and midcaps space, bearsRupak De, Senior Technical Analyst at LKP Securities said, ‘’Both indices slipped below their recent consolidation levels, sparking increased bearishness among market participants. They dipped below crucial short-term moving averages, further dimming the overall sentiment.''

‘’While buying on substantial dips may offer opportunities, it's essential to be highly selective and focus on specific stocks within the broader market landscape,'' added De.

On way-ahead, Prashanth Tapse, Senior VP (Research), Mehta Equities Ltd noted, ‘’If today’s price action on Dalal Street is any indication then the short-term technical outlook for Nifty remains in favor of bears. Technically, the confirmation of strength for the index is only above its biggest hurdles at 22,527 mark, while support is placed at 21,875 mark,'' added Tapse.

 

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.

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ABOUT THE AUTHOR
Nikita Prasad
Nikita covers business news and has been producing news on digital platforms since 2018. She writes on economy, policy, markets, commodities, industry. Her core areas of interests include infrastructure, energy, oil and gas, railways, and transport/mobility. She has worked for business news channels like Moneycontrol, NDTV Profit, and Financial Express in the past. If you have story ideas/pitches/reports or quotes/views to share, reach her at nikita.prasad@htdigital.in.
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Published: 13 Mar 2024, 09:13 PM IST
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