After a volatile Indian stock market in September, what lies ahead next month? Know from expert

livemint.com:

₹16,026cr on 27th Sept while net inflow from DIIs is ₹14,230cr as on 21st Sept. During this month, selling was also noticed at HNI’s desk especially in the mid & small counters. Maybe contemplating to book profit after the solid performance of the category in FY24 during April to August.

The Nifty midcap and Nifty small caps index are up by 38% and 45% in the last 6months. Due to the sharp rally, it is rational to assume that short-term performance may see constrains. However, we feel that the medium to long-term trend is expected to be maintained, supported by domestic earnings growth, which is forecasted to hold a multiple effect compared to large caps.

Secondly, the valuations are not at a bubble level, like the Nifty small caps 100 index, which is at a one year forward P/E of 16x, which is the long-term average, assuming healthy earnings growth. Another point tinkering the mind of investors is that, can the performance of Mid & Small caps be influenced by the deployment of ASM on SME stocks. The implementation of ASM in the month of October will have a ripple effect on the performance of SMEs.

However, the exact interplay and impact of this on Small-cap stocks are speculative at this stage. SME are small businesses with a capital size of less than ₹25cr, often confront more significant challenges compared to larger establishments. They are generally riskier in nature than small-cap stocks, which themselves carry inherent risk within a given business cycle.

Hence if there is a slowdown in business and the stock market both will be most affected. The NSE SME index is up by 75%, and the BSE SME IPO index is up by 132% in the last year as of 31st August, compared to 10% by Nifty500. The valuation of the SME index based