Indian stock market indexes, Sensex and Nifty 50, fell by more than 0.5 per cent each on Monday amid heavy selling in metals, banks, real estate, energy and auto stocks.
The broader market underperformed the frontline index, with the Nifty Smallcap 100 index down over 3% and the Nifty Midcap 100 index down over 2%.
SJVN, Amber Enterprises, NBCC (India), HUDCO, IRB Infrastructure Developers, Indian Overseas Bank and MCX India fell in the range of 9%-20%, weighing down the smcallcap index.
In the Nifty Midcap 100 index, stocks of NHPC, IRFC, Bharat Dynamics, RVNL and Yes Bank fell the most with losses of around 8% to 12%.
Also read: NHPC stock fell 10% ahead of today's third quarter results. Should you buy, sell, or hold stocks?
Analysts have expressed concerns about frothy valuations across the market and believe large-cap stocks are safe from a long-term perspective.
“Mid-cap and small-cap stocks are booking profits after a sharp rally. The market is depleted at high levels and some of the funds are going to IPOs. Valuations in the mid-cap and small-cap space are It remains expensive and incremental upside seems limited,” said Avinash Gorakshakar, head of research at Profitmart Securities Private Limited.
Gorakshakar suggests investors to book profits in mid-cap and small-cap stocks that are trading at overvalues and be selective in this space.
On the other hand, some analysts believe that part of the correction in mid-cap and small-cap stocks is due to increased margin requirements for MTFs (margin trading facilities) by securities companies. Some brokerages have reportedly raised margins on BNPL (buy now, pay later) services amid soaring stock market volatility.
Also read: NBCC stock fell for the sixth day in a row and was locked in a 10% drop zone.Here's the reason
Vinod Nair, head of research at Geojit Financial Services, said the broader index sentiment remains cautious as rising margins have had a big impact on mid- and small-cap stocks and valuations abound. He said he thinks there are.
“Broader market valuations remain elevated. Investors can lock in profits in expensive mid-cap stocks and rebalance or shift some of their funds into large-cap stocks,” Nile said. .
He advises investors to focus on IT, pharma, FMCG, telecom sectors and large private banks as there are good investment opportunities here.
As of 12:30 pm, the benchmark Sensex was trading 349.61 points or 0.49 per cent lower at 71,245.88 and the Nifty 50 was trading 120.50 points or 0.55 per cent lower at 21,662.00. Nifty Midcap 100 fell 1.85% and Nifty Smallcap 100 fell 3.12%.
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Disclaimer: The views and recommendations above are those of individual analysts or brokerages and not of Mint. We recommend checking with a certified professional before making any investment decisions.
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