Smallcap index reaches 4-week low, BSE MidCap drops 1.80% to 7-week low; here's why

 Smallcap index reaches 4-week low, BSE MidCap drops 1.80% to 7-week low; here's why

Following a downward trend on Wall Street last Friday, the Indian benchmark indices continued their losing streak for a fourth straight trading session on Monday. This was due to worries that the US Federal Reserve might maintain its hawkish stance for an extended period of time as well as rising tensions in the Middle East, primarily because of the ongoing war between Israel and Palestine.

This put pressure on mid- and small-cap equities in today's session in addition to large-cap companies. The BSE SmallCap index struck a four-week low by losing 3.3% to record an intraday low of 36,937, marking the greatest intraday decline since September 12. The BSE MidCap index plummeted by 1.80% to achieve an intraday low of 31,305 in Monday's session, reaching a seven-week low.

PNB Gilts was the worst performer among the companies in the BSE SmallCap index, suffering a notable decrease of 14.2%. Sequent Scientific, Kirloskar Brothers, Hindustan Construction Company, Ion Exchange (India), Jubilant Pharmova, Jai Corp, and KIOCL were next, all of which saw losses in trading of over 10%.

A number of other stocks, including Vascon Engineers, Onward Technologies, MTNL, Parag Milk Foods, Asian Granito India, Star Cement, Man Industries (India), Titagarh Rail Systems, Orient Paper & Industries, B L Kashyap & Sons, SEPC, Sasken Technologies, Prime Focus, and Atul Auto, experienced declines of 8–10%.

The worst performer in the BSE MidCap index was Laurus Labs, which had a 9% reduction. SJVN, Indian Overseas Bank, Bank of India, IRFC, Aditya Birla Fashion and Retail, UCO Bank, Vodafone Idea, Union Bank of India, and Bharat Heavy Electricals were the next worst performers, all of which saw their share prices fall by more than 5%.

We predict a likely short-term downturn in the financial markets owing to multiple global worries, according to Anirudh Garg, Partner and Head of Research at Invasset, PMS. Multiple nations' involvement in the continuing Israel-Gaza war has created uncertainty, which has increased the price of gold and bonds and stoked unfavorable sentiment. Rising oil costs have further intensified this unfavorable sentiment. We expect a 12% to 15% decline in midcaps and small caps, as well as a probable 10% fall in the Nifty 50 index.

The emphasis on positive industries, especially capital goods, which directs money into mid- and small-cap enterprises, is the main cause of the notion of expensive equities. But these prices may not be justified, particularly if growth slows, which might lead to a large 50% P/E depreciation," he said. 

"We support cautious investing. Some businesses may continue to trade at fair prices, making them even more desirable when the market is weak. While we are still completely invested as of right now, we will start to record profits gradually. In these unsettling times, caution is essential, and rash purchases need to be avoided, he said.