Stock Market Today: BSE Midcap, Smallcap Surge Over 1% Each; What Should You Do?
Introduction
Nishant Kumar: Kotak Institutional Equities reports that most mid and Smallcap stocks are still trading at high valuations despite recent sharp corrections.
Experts anticipate further corrections in the smallcap segment due to its high valuation.
On Thursday, March 14, a day after a 5% decline, the BSE Midcap and Smallcap indices rebounded, each gaining over 1% during the morning trade session.
At around 10:25 am, the BSE Midcap index rose by 1.02%, while the BSE Smallcap index surged by 1.6%. Concurrently, the benchmark Sensex registered a 0.10% increase.
Stock Market Today-BSE Midcap, Smallcap Surge:
The previous session witnessed significant drops in mid and smallcap stocks, driven by concerns about their inflated valuations. Analysts had warned about froth and bubbles in the smallcap sector, leading investors to take profits.
Kotak Institutional Equities highlights that despite recent corrections, many mid and smallcap stocks still maintain high valuations. The firm expresses uncertainty about whether the correction reflects a return to fundamental market principles or if it remains driven by sentiment and narratives. It suggests that low-quality stocks may still have further declines.
The firm notes that over the past three years, high returns and expectations of similar performance may have attracted retail investors to the mid and smallcap segments, facilitated through mutual funds.
Experts foresee additional corrections in the smallcap segment due to lingering high valuations, advising investors to pivot towards quality largecap and midcap stocks.
They emphasize the historical lesson that inflated valuations are unsustainable. Therefore, the recent market downturn, particularly in broader markets, is unsurprising. They suggest focusing on largecaps and quality midcaps for investment opportunities.
V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, believes that market turbulence presents selective buying opportunities. He recommends accumulating high-quality private sector banks and leading companies in capital goods, telecom, and autos. Despite market fluctuations, he asserts that India’s macro fundamentals remain strong and the bull market continues.
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