The smallcap and midcap indices rebounded on Thursday following heavy pounding in an earlier session, with buying emerging in beaten-down stocks.
The National Stock Exchange Nifty Midcap 100 rose 2 per cent, while the Nifty Smallcap 100 gained 3.5 per cent. Both indices had plunged about 5 per cent each a day earlier, marking their worst performance in two years.
The gains in the benchmark indices were relatively modest.
The S&P BSE Sensex ended the session at 73,097, with a gain of 335 points, or 0.5 per cent.
The Nifty 50 outperformed on account of the sharp recovery in Adani Group stocks.
Adani Enterprises gained 6 per cent, the most among the Nifty 50 components, followed by Adani Ports, which gained nearly 5 per cent. After dropping over 6 per cent, the Nifty PSE Index rose 2 per cent.
Market players said it remains to be seen if the recovery can be sustained as the spike in volatility has dented investor confidence.
“Some of these midcap and smallcap stocks have gone down 30–40 per cent. A bounce-back was bound to happen. However, whether this recovery will continue is a big question. The sharp fall has dented confidence. Some may opt to sell their loss-making holdings to adjust for capital gains. Overall liquidity is also tight due to advance tax payments,” said Ambareesh Baliga, an independent equity analyst.
Two-thirds of Sensex stocks gained. Infosys rose 2.5 per cent and contributed the most to Sensex’s gain. Services stocks gained the most, with their sectoral gauge rising 3.9 per cent.
“Markets, especially midcap and smallcap, will take direction from the outcome of the mutual fund stress test. Also, investors would track the key data points from the US. We expect broader market volatility to continue in the near term. Thus, retail investors should take this correction as an opportunity to accumulate quality names in three to four tranches. We suggest making a higher allocation towards largecaps as valuations are comfortable along with steady growth prospects,” said Siddhartha Khemka, head of retail research at Motilal Oswal Financial Services.
The Securities and Exchange Board of India Chairperson Madhabi Puri Buch said this week there were pockets of froth in the market, and it might not be appropriate to allow that froth to build up.
The securities regulator has directed smallcap and midcap schemes to conduct a few tests on operational parameters such as investor concentration and liquidity management.
Fund houses are expected to declare the “stress test” results on Friday.
Market players said there was some nervousness ahead of the results of the stress tests, which will help ascertain a scheme’s ability to withstand sudden redemption pressures.
First Published: Mar 14 2024 | 7:56 PM IST
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