Fewer stocks suffer deep cuts in the current selloff
small-cap stocks appear to have held up better in the recent risk-off sentiment than on other similar occasions in the past. An ET study comparing the current selloff with some previous ones showed that the number of stocks that fell over 30% amid the current 10% decline in the Nifty since September 27 is lower than in earlier instances.
The study compared how many stocks fell by what extent whenever the benchmark indices fell at least 10% from their highs. In the past decade, the Nifty has fallen at least 10% from its highs on at least six occasions (including the current one). In most of these instances, more mid-cap and small-cap stocks have fallen at least 30% than in the ongoing declines.
In the selloff since September 27, triggered by record foreign institutional outflows, 107 stocks have declined over 30%, as against 378 in February-June of 2022 and 1,303 at the start of Covid.
Analysts said the absence of sharper cuts in mid-cap and small-cap stocks in the current decline is because of continued purchases by domestic investors.
Also, the selling was predominantly in stocks with higher foreign ownership. Overseas investors' holdings in the country are mostly in blue-chip stocks. Some analysts said it also means that the pain in mid-caps and small-caps may not be over yet.
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