Mid and small cap indices fall by more than 5% each in two sessions
MUMBAI : Mid and small cap indices recorded strong profit taking on Wednesday after consistently outperforming in recent weeks.
After hitting a new all-time high, BSE MidCap and SmalCap fell more than 5% each in two sessions as investors rushed to post profits after the recent steep rally in markets.
At the start of trading, ESB MidCap lost more than 550 points or 2.12%, while ESB SmallCap lost almost 840 points or 2.84%. On Tuesday, BSE MidCap and BSE SmallCap fell 2% and 1.8% respectively.
“Investors should remain cautious about making a new entry into small and mid-cap stocks after Tuesday’s market move, rather than waiting for a reasonable valuation to take new positions in fundamentally good stocks,” Mohit said. Nigam, PMS Manager, Hem Securities.
Analysts say that among mid- and small-cap derivative stocks, the price correction was very strong as the unwinding of long positions near the highest levels pushed the indices down.
The mid- and small-cap indices have outperformed the larger Sensex and Nifty indices so far in 2021 with gains of 47% and 63% respectively. So far in October, the two have gained more than 6% each.
“Overall, we remain positive on small and mid caps for the long term, and believe that any significant decline is a good opportunity to accumulate quality stocks. and small spaces will continue to outperform large cap companies due to a robust demand environment in these sectors, ”added Nigam.
Vikas Jain, senior research analyst at Reliance Securities, says second quarter results will be important for the next stage of the upside, as any disappointment in margins can lead to strong profit reservation, so you have to be very selective and buy in stages of corrective action. .
“After the strong recovery of mid and small caps, profit taking is seen through them, as the valuations of many stocks have reached unrealistic levels. However, if we remove some of the very expensive names, this correction offers upside opportunities, given the proposed easing and the resumption of economic activity, the festive mood and the improvement in demand. Balance sheets and cash flow continue to improve as businesses tighten costs and deleverage. Going forward, delivering second quarter FY22 earnings against earnings guidance would provide additional market direction, ”said Sneha Poddar, vice president of research, brokerage and distribution, Motilal Oswal Financial Services.
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