Falling up to 13 per cent this year so far, BSE smallcap and midcap stocks have lagged behind the benchmark Sensex as experts said these indices had climbed more than the frontline index during the “good times” and a deeper correction is natural in the current turbulent times.
Equity markets have faced many headwinds this year with the emergence of geopolitical tensions, inflation concerns and unabated selling by foreign funds.
Experts said that there has been nervousness across the capital markets both domestic and globally mainly driven by these challenges.
The BSE smallcap index has tumbled 3,816.95 points or 12.95 per cent this year so far while the midcap gauge fell by 2,314.51 points or 9.26 per cent. In comparison, the 30-share BSE Sensex declined by 3,771.98 points or 6.47 per cent this year.
“The mid and smallcap indices had also gone up a lot more than the Sensex during good times so it is only natural that they will fall more than the Sensex during bad times. Rise and fall in mid and smallcaps tend to be more pronounced than their largecap counterparts,” said Rahul Shah, Co Head of Research, Equitymaster.
He further said as far as the current trend is concerned, while the markets are no longer expensive, they aren’t cheap either. “This is a market where quality and growth will be rewarded and valuations and bad quality will be rejected,” Shah added.