Dalal Street saw a sharp downturn today as midcap and smallcap shares faced a significant crash of 2%, driven by profit-booking and weakened global cues. The benchmark indices, Sensex and Nifty, ended substantially lower, with Sensex slipping 790 points to 72,305 and Nifty closing 247 points lower at 21,951.
The BSE smallcap index took the lead in the correction, plunging 890 points or 1.94% to 44,998, with an intraday crash of 1,011 points. Similarly, the BSE midcap index declined 793 points intraday, ultimately ending 724.87 points or 1.82% lower at 39,019. On NSE, the Nifty midcap 100 index closed 952 points lower at 48,089, while Nifty smallcap 100 saw a decline of 302 points, closing at 15,875.
The crash in the midcap and smallcap space followed market regulator Sebi’s move to address concerns over large fund inflows. Sebi has instructed asset managers to provide more information to investors about the risks associated with their small and mid-cap funds. Additionally, mutual funds have been asked to impose a cap on fund flows into small-cap and mid-cap stocks and rebalance portfolios.
The Association of Mutual Funds in India (AMFI) responded to Sebi’s directive by urging asset management companies (AMCs) to introduce a policy safeguarding investors in small-cap and mid-cap segments.
BSE midcap and smallcap indices, which have been trading near record highs, were impacted the most by the weak sentiment in the market. In contrast, the BSE large cap index saw a relatively modest decline of 104 points, closing at 8,504. Notable losers in the large cap space today included Reliance Industries, Maruti Suzuki, and Shree Cements.
Analysts note that midcap and smallcap indices, despite today’s correction, are still trading near their record highs. Riyank Arora, a Technical Analyst at Mehta Equities, anticipates more upside in these stocks, emphasizing that as long as the benchmark indices trade above crucial support levels, there is potential for upward momentum.
Abhijeet from Tips2trades, however, remains cautious, pointing out that Nifty Midcap and Smallcap indices appear bearish on the daily charts. He suggests that a daily close below specific support levels could trigger a sharper correction in the near term.
