Smallcap index

Stock Market Chaos: Smallcap Meltdown Grips India

Smallcap stocks take a nosedive with 1050 hits at lower circuits. Find out the reasons behind the dramatic downfall!

The Indian stock market witnessed a chaotic scene as the Nifty Smallcap 100 index plunged by 5.3%, with 98 stocks closing in the red. This steep decline was sparked by concerns raised by SEBI about the growing bubble in smallcap and mid-cap stocks. The selloff extended to prominent companies like Tata Investment Corporation Ltd, HUDCO, and TV18 Broadcast, sending shockwaves through the market.

The downward spiral continued with the Mid and Smallcap indices turning negative for 2024, attributed to the AMFI-SEBI stress test mandate and regulatory scrutiny. Over 80% of shares from this category were impacted, reflecting the widespread panic among investors. Amidst the turmoil, the Smallcap 100 index hit a 12-week low, following SEBI's warning of excessive speculation in small-cap and mid-cap segments, causing alarm in the mutual funds industry.

With the Smallcap index plummeting by 10% from its peak after SEBI's red flags, the market sentiment took a significant hit, leading to a broader weakness, including a decline in the PSU index. This massive selloff marked one of the worst days in recent years for Indian stocks, with small and mid-cap stocks witnessing a sharp decline of over 4%.

Analysts pointed out that the heightened valuations in the small and mid-cap segments had long been a cause for concern. However, the recent regulatory actions coupled with SEBI's stern message amplified the fears, resulting in the unprecedented downfall. The market outlook remains uncertain, with investors closely monitoring the developments and bracing for further impact.