Broader Markets Down 4% Amid Intense Selling Pressure

Broader markets withered off in losses as investors went on a selling spree against their holdings in smallcap and midcap stocks. Dismal market sentiments have pulled down Nifty Midcap 100 and Nifty Smallcap 100 by 4% in today’s trading session.

While experts have repeatedly warned investors about stretched valuations in midcap and smallcap spaces, retail investors have put these suggestions on the back burner.

Nifty Midcap 100 fell by about 18.9% from its lifetime highs, while Nifty Smallcap 100 tumbled 22%. In total, these losses have eroded ₹16.8 lakh crore from investors' portfolios.

Prior to heightened selloffs in mid and small-cap stocks, ICICI Pru AMC's CIO S Naren remarked in a distributor conference warning investors about the possible risks of SIPs in mid and small-cap funds citing market volatility. He advised investors to exit these segments by questioning their long-term potential.

Amish Shah, Head of India Research at Bank of America argued that mid and small-cap stocks are still overvalued despite recent corrections. He expects these segments to further correct in the near future while giving out returns lower than large cap counterparts.

The selloff in the market has intensified in the last two months wherein small as well as midcap indices together fell 20% from their record highs.

Shah told CNBC-TV18, “India is currently in a cyclical downcycle or growth moderation phase. This makes it difficult to justify valuations above long-term averages, even after recent market corrections.”