Sensex and Nifty experienced a notable decline on Wednesday, driven by various factors including a surge in US bond yields following CPI inflation data and selling pressure on key stocks like Reliance Industries (RIL) and Tata group companies.
Impact of US Bond Yields and Inflation Data
The primary catalyst behind the market downturn was the rise in US bond yields, triggered by the release of CPI inflation data in the United States. This led to concerns among investors about the potential impact of higher inflation on global economic stability, contributing to a cautious sentiment in the Indian stock market.
Smallcap and Midcap Selloff
A significant aspect of today’s market movement was the continued selloff in smallcap and midcap indices, with both segments experiencing a sharp decline of up to 3%. This decline has been attributed to valuation concerns, as the broader market witnessed excessive valuations driven by retail investor enthusiasm.
Market Expert Insights
V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, emphasized the sustained weakness in the broader market, particularly in the smallcap segment. He highlighted concerns regarding excessive valuations driven by retail investor exuberance and noted that regulatory actions, such as SEBI’s recent measures, have triggered a correction in smallcap indices.
Additionally, Vijayakumar pointed out that mutual funds, including ICICI Pru, have halted lump sum investments in their mid and smallcap schemes, indicating a shift towards large-cap investments. This trend is expected to continue, potentially leading to continued outperformance of large-cap stocks.
Market Statistics
By midday, the market downturn had led to a significant number of stocks hitting their lower circuit limits, with a substantial portion also reaching their 52-week lows. The broad-based selloff was evident, with the majority of actively traded stocks witnessing declines, highlighting the widespread nature of the market turbulence.
