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Mid-caps, small-caps in bear territory; more than 560 shares from each segment hit lower circuit, 52-week low

Since October, FIIs have sold over Rs 3.68 lakh crore, while DIIs have net bought Rs 2.8 lakh crore worth of shares. This risk-off sentiment is largely thanks to inflation concerns, which have forced central banks in many countries to raise policy rates

June 20, 2022 / 05:36 PM IST

On June 20, the broader market seemed to be under severe selling pressure. This, when the benchmark indices showed a slight reversal, following a loss of over 7 percent in the previous six consecutive sessions. Stocks hitting the 52-week lows were galore.

In fact, the broader space has already moved into bear market territory, with the Nifty Midcap 100 index having crashed 24 percent from the high (33,243) touched on October 19 last year, and the Nifty Smallcap 100 index having tanked 34 percent till now, from the record high of 12,047 on January 18 this year.

Generally, a fall of more than 20 percent from record high is considered bear market territory.

The ongoing fall started on June 3. Since then, the Nifty50 has plunged nearly 8 percent, Nifty Midcap index fell 14.5 percent and Smallcap index tumbled 11.6 percent. And all this is thanks to inflation concerns, as a result of which central banks kicked off a swift rate hike cycle this year, which experts feel can cause recession at least in the developed markets.

On a day when the benchmark indices were looking to bounce back, the market breadth was fully under the control of bears, with about seven shares declining for every share that climbed on the NSE, and on the BSE about five shares correcting for every advancing share.

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“Events of the last few days have increased the risk of recession in the US. Synchronised rate hikes by most central banks will certainly hit global growth this year. High interest rates and lower growth will impact corporate earnings. Risky assets are reacting to this pessimistic scenario,” VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, said, adding the 72 percent crash in the price of bitcoin is a reflection of the fear and risk aversion among investors.

The only supporting factor in terms of money flow for the market, when there has been a consistent outflow from foreign institutional investors (FIIs), is the inflow from domestic institutional investors (DIIs) and retail investors since March last year. As a result of this “the correction in the Indian market is not as steep as in the US”, said Vijayakumar.

The Dow Jones Industrial Average fell more than 19 percent and S&P 500 lost nearly 24 percent from its record high hit in May and April last year respectively.

FIIs have net sold more than Rs 2.67 lakh crore in the current year, and since October last year the outflow has been more than Rs 3.68 lakh crore. On the contrary, during the same period, DIIs have net bought Rs 2.8 lakh crore worth of shares.

The recovery in benchmarks (if any) from oversold levels is likely to be temporary as the market will closely watch the Fed testimony scheduled this week, experts said.

“This is finally a data-light week for India, and the US cash markets are also off for a holiday, and hence, the market is taking its time to build on the oversold conditions. Gains may be limited as Fed testimony scheduled this Wednesday will keep risk appetite under check,” Anand James, Chief Market Strategist at Geojit Financial Services, said.

Investors lost big money

Investors have lost Rs 3.5 lakh crore of wealth so far on Monday (at the time of writing this article) as the BSE market capitalisation fell to Rs 233.26 lakh crore, the lowest since July 2021, from Rs 236.77 lakh crore in the previous session.

With this, there has been an erosion of Rs 25.7 lakh crore of investors' wealth since June 2, when the fall started in the market.

Over 500 stocks at lower circuit

The fall in the broader space was so severe that the number of shares hitting lower circuit as well as touching 52-week low crossed more than 560 shares each at the time of writing this article.

The BSE data indicated that 572 shares hit lower circuit, against 138 stocks trading at the upper circuit, which included shares from 'B' Group and lower Group categories.

Stocks on the lower circuit included Dhani Services, Vivimed Labs, De Nora, BL Kashyap, Megasoft, Mawan Sugars, Ugar Sugar, Tree House, FCS Software, Kavveri Telecom, Shah Alloys, Axiscades, SE Power, A2Z Infra, Rajshree Sugars, SPML Infra, Vikas Life, Parsvnath, Ankit Metal, MEP and Hindustan Motors.

Further, 562 stocks were at 52-week lows on Monday, against 51 stocks at 52-week highs

Of 562 stocks, nearly 200 stocks were from 'A' Group including Axis Bank, Aarti Industries, Aditya Birla Capital, Amara Raja Batteries, Astral, Aurobindo Pharma, Bank of India, Mrs Bectors Food, BEML, BHEL, Biocon, Birlasoft, Ceat, CESC, CSB Bank, Dalmia Bharat, Emami, Exide Industries, Gland Pharma, Glenmark Pharma, Godrej Industries, Godrej Properties, HEG, Heranba Industries, Hindalco Industries, HPCL, Indiabulls Real Estate, India Cements, IndusInd Bank, InterGlobe Aviation, IOB, IOC, Jindal Steel & Power, LIC Housing Finance, LIC, Manappuram Finance, Motherson Sumi, NMDC, Punjab National Bank, RBL Bank, RITES, Rossari Biotech, SBI Card, Shree Cement, Symphony, Tata Steel, and Vedanta.

Right time to invest

Most experts feel this is the time to gradually accumulate quality large-caps as all indices have fallen in double-digits from their highs, indicating pricing in inflation concerns and recession (if any) risk.

“In the present scenario, as market participants price in expectations of further rate hikes over this calendar year, equity valuations have started to fall back to historical averages. And over the next couple of quarters, as we see policy impact on curbing inflation, markets should start to consolidate, providing attractive entry levels for investors,” Vivek Goel, Joint MD at Tailwind Financial Services, said.

Vijayakumar also advised that investors can use the weakness in the market to buy high-quality large-caps across sectors.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
Sunil Shankar Matkar
first published: Jun 20, 2022 05:09 pm
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