The total market capitalisation of BSE-listed companies was ₹372.1 lakh crore today, down from ₹385.6 lakh crore in the previous session. Investors lost around 13.5 lakh crore in a single day on Wednesday.
On the backdrop of positive global cues, although today’s session started with minor gains, the domestic benchmark indices, the Nifty 50 and the Sensex, lost over 1%. Market analysts believe that the major cause of the domestic stock market’s decline was the sharp decline in the midcap and small-cap indices, which fell by 4 to 5% during today’s trading session.
“Recently, the Small and Midcap stocks faced a bumpy ride due to SEBI’s vigorous crackdown on over-speculation, prioritizing the safeguarding of market participants’ interests. Both indices slipped below their recent consolidation levels, sparking increased bearishness among market participants.
“Recently, the Small and Midcap stocks faced a bumpy ride due to SEBI’s vigorous crackdown on over-speculation, prioritizing the safeguarding of market participants’ interests. Both indices slipped below their recent consolidation levels, sparking increased bearishness among market participants.
The 30-share BSE Sensex ended lower by 906.07 points or 1.23% at 72,761.89 level while the Nifty 50 closed at 21,997.70 level, down 338 points or 1.51%.
Arvinder Singh Nanda, senior vice-president at Master Capital Services Ltd emphasised that the sharp decline in midcap and small-cap stocks was a reaction to the market regulator’s worries about the overvaluation of these stocks, which resulted in froth-building in these segments.
The regulator noted the outstanding performance and present high values of these categories on Monday, expressing concerns about possible frothiness in these areas. According to Nanda, the comments have triggered buzz in the market since they have raised rumours about possible limitations on funds allocation.
The increase in US bond yields following US CPI inflation data and selling pressure on index heavyweights such as Reliance Industries (RIL) and some Tata group members were other factors contributing to the fall.
Apart from the premium valuation, no fundamental problem has been identified that could negatively impact the long-term growth picture of domestic midcaps, according to Vinod Nair, Head of Research at Geojit Financial Services.
Nair said that the Fed’s ability to quickly lower interest rates has been brought into question due to the persistent US inflation rate. However, there seem to be indications that domestic inflation is easing. But the downward trajectory in commodity prices could prompt central banks to think about cutting rates in the second half of 2024, which would be good for equities.
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