Mid-, small-caps see sharp selloff in mkt

livemint.com:

NEW DELHI : Asharp selloff in the mid-cap and small-cap space caught investors off guard on Tuesday. The mid-cap and small-cap indices saw steep corrections of 3-4% during the day even as the Nifty ended just 0.02% lower but not before scaling the all-time high of 20110.35. Valuation discomfort is likely to have set in after a sharp rally, which is leading to heavy selling in mid-caps and small-caps, said analysts.

“As expected, we have witnessed some weakness in small- and mid-cap stocks today and a rotation into defensives, especially tech, following the recent exuberance in the broader markets," said Pranav Haridasan, managing director and chief executive officer, Axis Securities Ltd. “In our opinion, one needs to take some risk off the table and move to quality large-cap names and reduce portfolio level beta," Haridasan said. Analysts were of the view that exuberance had been a key reason for the continued sharp rally in the mid-cap and small-cap stocks as fundamentals were not able to justify the move.

“We see limited point in trying to find fundamental reasons behind the steep increase in stock prices of several mid-cap. and small-cap," Kotak analysts said on Monday. The mid- and small-cap indexes have seen a sharp rally of more than 30% in fiscal year-to-date, outperforming benchmark indices that have gained slightly over 10% during the period.