Broader markets correct over 5% in 2 sessions – What investors should do? Analysts explain

The markets on Wednesday continued its declining streak for the second consecutive day, with Sensex slipping over 450 points and Nifty50 ending below 18300-market at the close. However, the broader markets bleed most than benchmarks, with Mid and Small-cap falling around 2 per cent each.

The BSE Mid-cap declined by over 503 points or 1.91 per cent to 25914.53 levels, while BSE Small-cap slumped 684 points or 2.31 per cent to the 28,879 mark at the market close on Wednesday.

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In the mid-cap category, Jubilant Food Works plunged nearly 9 per cent after the company's same-store-sales growth came in at 26.3 percent for the July-September quarter, lower than expectations. 

Similarly, Indian Railway Catering and Tourism Corporation (IRCTC) slipped 18 per cent intra-day, amid heavy volumes, amid buzz that the government is appointing a regulator for the rail sector. 

Besides, Sona BLW Piercing, PI Industries, Supreme Industries, and OFSS declined between 5-10 per cent dragging the mid-cap index most.

Meanwhile, Mastek, Deepak Nitrate from small-cap segment, declined up to 14 per cent each on the back of lower than expected second-quarter results, while CERA, Navin Flourine, Dixon Technologies, Aarti Industries, DCM Shriram slumped between 7-11 per cent at the close today.

Motilal Oswal Financial Services’ AVP Research, Broking & Distribution Sneha Poddar said, “Post the sharp rally in midcaps and smallcaps, profit booking is being witnessed across them as the valuations for many stocks have touched unrealistic levels.”

“However, if we remove some of the very expensive names, then this correction do offer bottom-up opportunities, given the more relaxations being offered and pick-up in economic activities, buoyant festive mood and an improved demand backdrop.”, she added.

According to Poddar, “The balance sheets and cash flows continue to improve as corporates tightened costs and deleverage. Q2FY22 earnings delivery versus earnings expectation would provide further direction to the market going forward.”

Urging the broader market investors to be cautious, Angel One Ltd’s Equity Research Analyst Yash Gupta pointed out, “We have seen a sharp selloff in the broader market in the last two days, mid and small caps had very share fall. stocks like IRCTC, IEX, Tata Motors, Tata Power, Deepak Nitrite corrected sharply in last 2 days.” 

“Nifty Smallcap 100 and Nifty Midcap 100 are down by more than 5 per cent and even several stocks are down by over 10 per cent. We suggest retail investors be cautious and avoid buying on dips kind of strategies, as we are seeing selling pressure in the broader market,” Gupta added.