Narrative stocks down 30-50% in market rout, valuations still unfathomable: Kotak Equities

bear market, with the Nifty 50 down nearly 16% from its peak and smallcap and midcap stocks suffering their worst crash since 2020. But despite a 30-50% plunge in several hyped «narrative» stocks, valuations remain difficult to justify, brokerage Kotak Institutional Equities said.

The brokerage said the broader market correction, exacerbated by the recent rout in smallcap and midcap stocks, has not translated into compelling investment opportunities. «We do not find value in most parts of the market despite the sharp correction across sectors and stocks. Flows have seen endless discussion among market participants but have proven (again) to be pointless to assess the market peak or correction,» Kotak Equities said.

India’s Nifty 50 index has fallen nearly 16% from its all-time high of 26,277, edging closer to bear market territory. Smallcap and midcap stocks have taken an even harder hit, with February marking their worst crash since the COVID-driven market meltdown of 2020. The BSE Smallcap index tumbled 14% last month, while the Nifty Midcap 100 dropped 10.8%, as panic selling gripped retail investors.

Kotak warned that investors should be cautious about betting on a rebound in «narrative» stocks—companies that surged on market hype rather than strong fundamentals. «Many such stocks are trading at unfathomable valuations despite the 30-50% correction in their stock prices in the past few months,» the brokerage said, likening the situation to a “dead cat” that may not bounce back.

“Investors waiting for a