Mr Contrarian S Naren proved right! Smallcap investors trapped in bear market
Nifty bulls were anxiously dissecting Trump's every move on the tariff front, bears found strength from India's most revered contrarian and value investor S Naren who issued a stark warning on mid and smallcap stocks last weekend. In the next three trading days, the smallcap index fell around 7% to enter bear market territory on Wednesday.
Several other indices like Nifty Next50 and BSE SME indices were already in bear grip, which means a fall of 20% from peak, Nifty Smallcap 250 index entered the bear zone for the first time in this cycle on Wednesday.
The pain in retail investor portfolios could be much deeper as small investors may have invested more funds at higher market levels.
«Taxes and trading costs would further dent the returns of investors. The market could already be on thin ice based on the usual trailing-returns argument for investment by retail investors. 12-month trailing returns have turned weak while 3-month and 6-month returns are negative,» said Sanjeev Prasad of Kotak Institutional Equities.
While the stock market has been under pressure ever since it hit a peak on September 27, the sell-off became sharper this week in smaller stocks, coinciding with ICICI Prudential Mutual Fund CIO Sankaran Naren's warning at a conference in Chennai on the weekend where he advised against doing SIP in small and midcap funds amid high valuations.
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