SENSEX, NIFTY TUMBLE; BROADER MARKET TANKS
Sebi’s red flags, MF investment curbs hit
sentiment; analysts expect further decline
Mumbai: Indian equity benchmarks tumbled nearly 1.5% on Wednesday, defying Wall Street’s overnight gains, as investors spooked by the recent freefall in small-cap and mid-cap stocks rushed to offload riskier holdings. Brokers pushed traders to liquidate bets in smaller shares bought on loans following the capital market regulator’ srecent warnings of ‘froth’ and ‘bubble’ in pockets of the market.
This sent the Midcap 150 and Small cap 250 indices plunging 4.2% and 5.2%, respectively their biggest single-day fall in two years. The Sensex fell 1.23%, or 906.07 points, to close at 72,761.89 and the Nifty 1.51%, or 338 points, to close at 21,997.70. Of the 50 stocks in Nifty, 43 declined.
The selloff eroded India’s market capitalisation by Z13.51akh crore in a single day. Analysts expect further declines with Kotak Securities’ head of equity research Shrikant Chouhan predicting the Nifty to drop by 2-3% and small cap and midcap indices to fall by 5-10%.
PSU Shares Among Big Losers
Brokerage Prabhudas Lilladher said the Nifty inseam a crucial support level of 21,900, Concerns that more mutual funds may put restrictions on investor flows into small cap handicaps' hemes have fuelled the market nervousness. ICICI Prudential Mutual Fund said it will not accept lump- sum money in its mid- and small. Cap schemes from March 14, while other fund ho- uses like Nippon, Tata and SBI have already put curbs on lumpsum investments in small cap schemes.
These moves are expected to dampen purchases of small cap shares, traditionally favored by reta: IL investors. Unabated investor flows into these mutual fund schemes have been a key reason for the buoyancy in these segments in the past year despite growing unease around stretched valuations of smaller companies
“Since more mutual funds are putting a cap on further investments in small and midcap stocks, worries about shrinking liquidity has led to profit booking,” said Shrikant Chouhan, executive V Pand head of equity research, Kotak Securities.
“This is leading Toa lack of buying interest in the segment and increased pressure on them a rkets.” Out of the3 976 shares traded on the BSE, 3,569 fell, while 350 rose. The Microcap 250 index cratered 62%. Notwithstanding recent calls of caution, the paceof drop in the broader market has taken market participants by surprise.
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