Stock Market

Mid and smallcaps bleed on D-Street

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Risk-averse investors continued to dump mid and smallcap shares on Friday which resulted in most of them tumbling to levels not seen so far in 2018. Ecommerce firm Infibeam Avenues slumped over 70 per cent, joining the growing list of smaller stocks that have been targets of bear attacks in the last couple of weeks. The BSE Midcap index fell 1.6 per cent to 14,763.20 — the lowest closing level since August last year.

The BSE Smallcap index ended down 3.4 per cent at 14,430.68 — the most in a day since February 2 this year.

Infibeam contributed 61 points out of the 509-point fall in the Smallcap index.

The index closed at the lowest level since March 2017 on a closing basis. Nearly Rs 1.95 lakh crore of market cap was wiped out on Friday while investors lost Rs 14.88 lakh crore of wealth in September alone.

This is the Sensex and Nifty’s worst ever monthly performance since February 2016. A WhatsApp message raised concerns about Infibeam’s accounting practices and set off a record decline in the stock.

Scrips such as Eros Media and Lakshmi Vilas Bank also took a beating, ending down about 20 per cent each. About 330 of the 876 Smallcap index constituents hit their lowest levels in a year on Friday while in the Midcap index, 25 or about a fourth of its 103 constituents hit 52-week lows. While the mid and smallcap shares have been drifting lower since February this year, the sharp selloff was triggered by the ILFS default.

Concerns around liquidity in the bond market are making investors more risk averse, and they are in turn, preferring to stay on the sidelines than try and catch falling knives in the market. “It is a question of loss of confidence.

Investors are feeling that if they don’t sell today, tomorrow they may get 15-20 per cent less on the stocks,” said Ambareesh Baliga, an independent market expert. “In a panic situation, no one looks at fundamentals,” added Baliga. The BSE Midcap index had hit an all-time high of 18,321.37 on January 9 this year.

It is down 17 per cent so far in 2018 after surging 48 per cent in 2017.

The Smallcap index had hit a lifetime high of 20,183.45 on January 15 and is down 25 per cent in 2018 after gaining close to 60 per cent in the previous calendar year. The continuous fall in the market in the wake of the ILFS default has led to margin calls being triggered, in which even fundamentally better stocks have faced the brunt, said market experts. “Margin calls may have been triggered since the stocks have fallen relentlessly.

The correction may get deeper as the macro situation has deteriorated,” said Piyush Garg, chief investment officer at ICICI Securities. The fear of rising interest rate environment, weak macros and general reversal in market trend is likely to keep investors on their toes in the days to come. “Interest rate worries are there.

If there is limited credit situation, then lending to tier-3 and tier-4 companies will get impacted.

It is more of a fear of lending freeze,” said Gopal Agrawal, senior fund manager at DSP Mutual Fund.




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