31 smallcaps fall 10-43% as markets fall 2.5% amid weak global cues

Indian markets remained under pressure through the week ended February 24 on the back of negative global cues and heavy FII sales. The triggers for this were the heightened geopolitical tensions between Russia and Ukraine, and hawkish comments by the central banks of the US and India.

The BSE Sensex shed 1,538.64 points (2.55 percent) to close at 59,463.93, while Nifty50 fell 478.4 points (2.66 percent) to end at 17,465.80.
The BSE Small, Mid, and Largecap indices fell 1.6 percent, 2 percent, and 2.7 percent, respectively.

"Most global equity markets witnessed corrections this week, as the markets seemed anxious about future Fed (US Federal Reserve) measures as the US has posted slightly higher-than-expected inflation numbers. Indian markets too were affected as the growth-inflation mix remains a bit worrisome," said Shrikant Chouhan, Head of Equity Research (Retail), Kotak Securities.

"Indian markets saw broad-based correction with a decline in major indices. Both Nifty 50 and the BSE Sensex index fell ~2.5 percent this week, whereas the BSE Midcap and the BSE Smallcap index declined between 1.5-2 percent.

"Almost all the sectoral indices posted negative returns this week. BSE Realty, BSE Commodities, and BSE Power index fell more than 3 percent. The minutes of RBI’s monetary policy committee (MPC) meeting in February highlighted members’ concerns about core inflation. While Brent crude oil prices remained range-bound this week, the US 10-year treasury yield inched up to 3.9 percent," Chouhan added.

All the sectoral indices ended in the red. The Nifty Metal index shed 6.2 percent, Realty, PSU Bank and Media were down 5 percent each, while the Nifty Bank index was down 3 percent.

The BSE Smallcap index shed 1.6 percent, with SVP Global Textiles, Sintex Plastics Technology, Zee Media Corporation, Capacite Infraprojects, Insecticides India, Future Consumer, DB Realty, Oswal Greentech, Pokarna, Monarch Networth Capital and Deep Polymers losing between 15-43 percent.

On the other hand, EKI Energy Services, Lumax Auto Technologies, Sanghi Industries, Dishman Carbogen Amcis, Equitas Small Finance Bank, Mahindra CIE Automotive, Olectra Greentech, Zen Technologies, Everest Kanto Cylinder, Inox Wind, Nucleus Software Exports, Kriti Industries (India) and Globus Spirits gained 11-20 percent.

"The domestic market witnessed continuous selling during the week on the back of a weak global market and persistent FII outflows. Global bourses were cautious as the US posted better-than-expected PMI numbers on the heels of strong jobs data and rising fears of aggressive Fed action. The minutes of the MPC meeting also revealed concerns over high inflation and its commitment to bring it under control," said Vinod Nair, Head of Research, Geojit Financial Services.

"In response to heightened fears of rate hikes, the US 10-year Treasury yield moved near 4 percent. Additionally, the Dollar index rose as the greenback surged following hawkish Fed comments and rising geopolitical tensions.

"The resurgence of the cold war between the US and Russia has also caused the market to be apprehensive. Although it should be a short-term effect, the fear of sanctions against Russia and its impact on the economy, especially on food and oil exports, is adding to the anxiety. India’s Q3FY23 GDP growth, scheduled to be released next week, is anticipated to moderate from 6.3 percent in the preceding quarter," Nair added.

The BSE 500 index declined 2.5 percent with Adani Enterprises, Adani Total Gas, Adani Transmission, Adani Green Energy, Macrotech Developers, Adani Wilmar, Tata Teleservices (Maharashtra), Aditya Birla Fashion & Retail, Uflex, and Indiabulls Housing Finance falling 10-23 percent.

"The downslide in the equity market persisted throughout the week, influenced by internal as well as external developments. The major reason for this is the overwhelming data suggesting the US economy might be stronger that one thinks, which means further policy tightening could be in store," said Joseph Thomas, Head of Research, Emkay Wealth Management.

"These pressures are not going away soon, and could dominate the markets for another quarter or so," he added.

After a pause last week, Foreign institutional investors (FIIs) resumed selling Indian equities, and liquidated stocks worth Rs 3,100.55 crore. However, domestic institutional investors (DII) continued to provide support, as they bought equities worth Rs 3,209.60 crore.

So far this month, FIIs have sold equity worth Rs 4,508.91 crore, while DIIs have bought equities worth Rs 12,397.75 crore.

Where is Nifty50 headed?

Siddhartha Khemka, Head, Retail Research, Motilal Oswal Financial Services

``In the near term, we expect the market to consolidate in the absence of any fresh trigger. However, stock specific action could be seen. Next week, investors will take cues from the macro data — like GDP and PMI numbers — that will be released. Auto sector stocks would be in focus as the monthly sales data is to be announced next week.’’

Amol Athawale, Deputy Vice President, Technical Research, Kotak Securities

``The downward spiral continued amid sharp bouts of intra-day volatility as uncertainty surrounding the weak global economic scenario, coupled with the probability of the US Fed maintaining a hawkish stance going ahead, weighed on the sentiment.

``The markets may continue to witness intermittent bearish spells as investors are likely to cut their long positions owing to multiple negative factors.

``Technically, the Nifty has formed a long bearish candle on the weekly charts, which indicates further weakness from the current levels. However, with the market in an oversold territory, we could see a quick pullback rally if the index trades above 17,500. Above that, the pullback is likely to continue till 17,600-17,750.

On the flip side, as long as the index is trading below 17,500, the weak sentiment will continue. The index could even retest the 200-day SMA level of 17,400.

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