Business · Markets · 2 hrs ago
Indian midcap index enters correction as smaller stocks also fall
Indian share prices have fallen, and the Nifty Midcap 150 is down 10.2% from its August high.
The Nifty Smallcap 250 has fallen 8% from its September high, while the Nifty Microcap 250 is down 8.1% from a high in early October.
A drop of 10% or more from a recent peak is generally called a correction, so the midcap index has crossed that threshold.
Smaller-company shares had drawn money from retail investors, but concerns about high valuations are growing.
Even after recent falls, the midcap index trades at a 42% premium to the Nifty, while the small-cap index trades at a 45% premium.
Analysts say smaller stocks may still be expensive compared with large companies, though an improving economy could bring a relief rally.
The Nifty Midcap 150 has fallen 10.2% from its 52-week high, entering correction territory as Indian equities sell off.
Small-cap and micro-cap indices have also fallen from recent highs, by 8% and 8.1% respectively.
Investors are concerned that elevated valuations could weaken future returns for smaller stocks.
The mid-cap index is trading at a 42% premium to the Nifty, while the small-cap index is at a 45% premium.
Anand Radhakrishnan of Sundaram Mutual said investors’ view of mid- and small-caps as a safe place to invest could be changing as valuations rise.
- Who
- Indian equity investors and the Nifty Midcap 150, Nifty Smallcap 250 and Nifty Microcap 250 indices.
- What
- The mid-cap index has entered correction territory, while small- and micro-cap indices have also fallen from recent highs.
- When
- The declines were reported on Wednesday; the mid-cap index’s 52-week high was recorded on August 31.
- Where
- Indian equity markets.
- Why
- A sell-off and concerns about elevated valuations have put pressure on smaller stocks.
This story does not have two clearly opposing sides.
The Nifty Midcap 150 recorded its 52-week high.
The Nifty Smallcap 250 recorded its high.
The Nifty Microcap 250 recorded a recent high.
The Nifty Midcap 150 fell 1.4%, the Nifty Smallcap 250 fell 2.3% and the Nifty Microcap 250 fell 2.6%.
- Nifty Midcap 150 decline
- 10.2% from its August 31 high
- Nifty Smallcap 250 decline
- 8% from its September 8 high
- Nifty Microcap 250 decline
- 8.1% from its recent high in the first week of October
- Mid-cap valuation premium
- 42% to the Nifty, compared with a five-year average of 40%
- Small-cap valuation premium
- 45% to the Nifty, below a five-year average of 75%
What people are saying
What is perceived as a safe space can gradually become unsafe as valuations go up. We are seeing corrections even in midcap and smallcap stocks, although this may not yet be visible at the index level.