After a steeper-than-expected rate cut by the US Federal Reserve, Indian equities started on a strong note with frontline indices scaling new peaks. Nonetheless, in the mid-trading session, it was the broader markets which were sharply dragged lower.

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At the time of writing the copy at around 11:53 am, the Nifty Midcap 100 was down over 1800 points from day's high level of 60,208. Nifty Smallcap 100 index too saw sharp losses and last traded with a gap-down of more than 2.5 per cent from the previous close.

The stocks contributing to the sharp losses in the Nifty Midcap 100 index include names like Indus Tower, BSE, Oil India, Torrent Power and Bharat Dynamics.

Losses in the Indus Towers widened after the Supreme Court rejected telco's plea for recalculation of AGR dues. At the last count, shares of Indus Towers traded with a cut of over 11 per cent at Rs 380 apiece on the NSE.

In the previous day's trade, BSE shares recorded stellar gains and marked a fresh record high.

Similarly within the Nifty Smallcap 100 index, stocks like IIFL, MCX, Apar Industries, Radico Khaitan, CAMS and Exide Industries among others emerged as top draggers.

Since long analysts have been red-flagging stretched valuation of mid and smallcap stocks which might have been stocks from the basket lower. 

Santosh Meena, Head of Research, Swastika Investmart said, "The midcap and smallcap segments, particularly sectors like defense, railways, and capital goods, which have performed exceptionally well over the past 2-3 years, are now witnessing a sharp correction. Valuations have long been a concern in the broader market, yet these stocks continued to rally despite being considered expensive."
 
However, there always comes a point when market euphoria fades. Domestic institutions, too, have shown signs of caution, holding significant cash reserves at elevated levels. I believe this correction could extend further, presenting a strong buying opportunity in high-quality stocks for long-term investors, she added.