In run to safety, investors dump risk, mid & smallcap stocks
economictimes.indiatimes.compenny stocks plunged on Monday, bearing the biggest brunt of investors' increased risk aversion triggered by concerns over the surge in US bond yields and geopolitical uncertainties.
The Nifty Midcap 150 dropped 2.7% and Small Cap 250 declined 3.8%, their biggest single day fall since September 12. Nifty's Microcap 250 index tumbled 5.11%.
Analysts said shares of smaller companies were overbought after the recent scorching rally that had resulted in their valuations turning pricey.
«We are seeing a mean reversion phenomenon in the markets where the mid- and small-cap indices both peaked in October and are now experiencing a correction at a rate faster than the Nifty» said Deepak Jasani, head of retail research at HDFC Securities.
«Investors display a sentiment of risk aversion and are not willing to wait longer, and hence are pulling out of the market booking profits wherever available or cutting losses.»
The Nifty Midcap 150 index is up 22.48% from the beginning of the year while the Nifty Smallcap 250 is up 25.83% in the same period.
These stocks are likely to shed more of their gains of this year as technical indicators are pointing to more pain.
«The Nifty Smallcap 250 closed below its 50-day simple moving average (SMA) on Monday and the correction wave is likely to continue where support could be seen at 11,800-11,600 levels,» said Amol Athawale, vice president, technical research, Kotak Securities. «Overall, a weak market texture is seen, and the correction is likely to continue as the market is largely bearish.»
Analysts said the rise in 10-year US Bond yields to 5% — a 16-year high, rising geo-political tensions in the Middle East, and continued strength in crude oil prices sparked the sell-off on
