The Indian stock market has fallen considerably in recent months with major indices falling below the support levels. With major stock price indices like the Nifty and Midcap index taking a plunge, the small-cap index has fallen at a higher rate thereby worrying investors. The small-cap index has fallen by more than 21% making it one of the worst-hit stock market indices. The small-cap stocks have taken a huge hit worrying investors who have invested heavily in different small cap stocks either directly or through mutual funds. The following article explores the impact of the recent market downfall on small-cap stocks and how investors can take necessary steps to mitigate the same:
- Steel decline in small-cap stocks:
The small-cap stocks have declined by a large percentage due to the overall market downfall. The volatility is mainly due to geopolitical tensions, outflow from foreign investment portfolios, and other economic factors that are beyond the control of the investors. According to recent market data, more than 48% of small-cap stocks have fallen by at least 40% causing significant losses to Investors. Various stocks including the Yes Bank share price have fallen by 42% making it imperative for investors to reassess their holdings and evaluate small-cap stocks fundamentally and technically.
- Notable underperforming stocks:
Yes Bank, one of the most prominent private sector banks, has witnessed a downfall of more than 40% in the past months. Other small-cap stocks like Jai Corp Ltd., Vakrangee Ltd, Zen Technologies Ltd, Quick Heal Technologies Ltd, and Netweb Technologies, etc have witnessed a downfall. Major small-cap stocks that have delivered exponential returns have fallen between the range of 20 to 40%. The overall market fall due to the outflow of FPI, reduction in earnings, and low growth opportunity have all contributed towards the fall in the small-cap stocks prices.
- Price resilience:
Despite the broader index and market fall, small-cap stocks have shown resilience in terms of stability and low price movements when compared with the Nifty50 index. The BSE Smallcap 100 Index has shown strength and showing signs of stability and improvement due to investor confidence in the high-growth potential stocks and their ability to withstand market fall. Moreover, with a consistent inflow of investments by domestic retail and institutional investors, the smallcap stocks and broader index have received the necessary cushioning against the outflow of foreign investor funds.
Conclusion:
Foreign investment inflow, small-cap stocks value adjustment, and overall recovery in the small-cap stock earnings can help protect small stocks from further downfall. Investors therefore must use caution before investing in small cap stocks and opt for complete analysis before investing. The extent of the broader market downfall is still unknown making it imperative for investors to take necessary actions in the right direction. The small-cap index has experienced correction making small-cap stocks of different segments available at low valuations. Investors must take benefit of the stock market fall and use the bounce back to get better returns. Value picking is essential and complete research can help with the selection of the best small-cap stocks.