Smallcap index looks set to end a 2-week winning run; Suven Life, Sanmit Infra, Angel One down over 10% this week
After registering gains in the past two consecutive weeks, the BSE Smallcap index appears poised to conclude this week in the red.
After registering gains in the past two consecutive weeks, the BSE Smallcap index appears poised to conclude this week on a downward trend. The index saw a substantial increase of almost 3 per cent last week and nearly 2 per cent in the preceding week. However, for the current week, the index has dipped by over 1 per cent.
As of Wednesday, the Sensex witnessed a decline of 1.5 per cent while the BSE Smallcap index experienced a retreat of 1.2 per cent for the week. If the index ends in the red for the week, it will have snapped its two-week winning run.
Most smallcap stocks have fallen this week, with stocks such as Suven Life Sciences, Sanmit Infra, Angel One, Panacea Biotec, GTL Infra, Sukhjit Starch, Dish TV India, Indian Energy Exchange and Nitta Gelatin India falling over 10 per cent each in the BSE Smallcap index, as of Wednesday.
However, a few, including Dredging Corp, MSTC, ITDC, ITI, Grauer & Weil, Tourism Finance Corporation of India, Rail Vikas Nigam (RVNL), Transpek Industry, Capri Global, Shalimar Paints, Ganesh Housing, Man Industries, Cochin Shipyard, MAS Financial Services and Waaree Renewable Technologies jumped between 10-38 per cent this week till Wednesday.
The domestic equity market remained entrenched in negative sentiment on Thursday, January 18, as the market benchmark, the Sensex, recorded a decline of over a per cent in morning trade. Notably, the small-cap segment faced more pronounced challenges, with the BSE Smallcap index witnessing a substantial 2.5 per cent fall in morning trade.
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However, both the indices pared losses as the day progressed; the Sensex traded 0.39 per cent lower and the BSE Smallcap index was 0.51 per cent down around 10:50 am.
Experts expected the market to see some correction as concerns over valuations were mounting, especially in the mid and smallcap space.
The market needed a trigger for correction which came in the form of HDFC Bank’s worse-than-expected results. Moreover, rising dollar index and the US yield after the comments of the Federal Reserve governor on being cautious about early rate reduction has also dented market sentiment.
Since November of last year, the domestic market has been doing well due to strong domestic economic indicators, expectations of political stability after the General Elections, and the anticipation of interest rate cuts by the US Federal Reserve and the Reserve Bank of India this year.
Sensex has gained about 12 per cent from November last year till Wednesday, January 17. On the other hand, the BSE Smallcap has jumped 19 per cent in the same period.
Retail investors have been bullish on smallcap stocks as they exhibited notable earnings growth. Moreover, investors looking for high-growth opportunities are lapping up these stocks.
However, experts emphasise that investors should avoid the short-term noise and the temptations of quick profit and have a long-term investment goal.
"The investors should always look at the broader picture with a long-term view and should ignore any short-term noise. The only important thing is to maintain proper asset allocation and avoid penny stock ideas. The idea of making quick money should be avoided," said Mukesh Kochar, National Head of Wealth at AUM Capital.
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