Smallcap stocks fall from the peak. Is this the buying zone?
The Indian stock market is in a clear downtrend. We had barely taken a breather from harsh tariffs, and now we find ourselves caught up in the consequences of a war.Given our dependence on oil and gas imports and trade with West Asia, this has serious implications for India. And the markets are reflecting that.The pain is much sharper in broader markets than what indices reflect.
If you own small-cap stocks, you have felt the pain.Could the war end soon and cause the market direction to turn up again? Sure, it's possible, but the way things have panned out in West Asia so far, there doesn't seem to be an immediate light at the end of this tunnel.The first and most important thing to remember is:''This too shall pass'. Wars, just like any other disruption to global financial markets, are temporary.During Operation Sindoor the stock market reacted negatively at first, but things returned to normal very fast. In fact, after the conflict, it seemed like the bull market had resumed.Even in 1999, after the Kargil war, the market delivered strong gains once the conflict ended.When Russia attacked Ukraine in February 2022, there was a serious disruption in global markets, and the stock market did not recover for a few months.
But then the market did recover and soared to new highs. That bull market lasted till September 2024.Expect something similar this time as well. There will be a period of gloom and bearishness.
Then stock prices will rise again.Those who bought stocks during the war will profit from the upmove that follows. Those who did not buy will be left with regret. Of course, you cannot buy any stock, especially smallcaps.
You have to be selective. Do your due diligence. Identify fundamentally strong small-cap stocks.
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