The Nifty Midcap 150 index has corrected 12.5% from its record high of 22,515.4 points on 25 September through Friday’s closing of 19,708.95. In that period, Kalyan Jewellers Ltd, ZFCommercial Vehicle Control Systems India Ltd, wind turbine maker Suzlon Ltd, Godrej Properties Ltd, and industrial gases producer Linde India Ltd have lost between 33% and 39%, per analytics firm IndiaCharts.
The Nifty Smallcap 250 index has fallen 14.4% from a record high of 18,688.3 on 24 September to 16,001.7 on Friday. In that period, Sterling & Wilson Renewable Energy Ltd shed almost half of its share price to ₹338.6 apiece, while skincare brand Mamaearth’s owner Honasa Consumer Ltd, Inox Wind Ltd and realty firm Sobha Ltd have lost 43-49%.
In all, 92 out of 250 stocks in the smallcap index have fallen by more than 20% while 54 out of 150 stocks in the midcap 150 index have corrected below 20%, said Rohit Srivastava, founder of IndiaCharts.
Meanwhile, retail investor holdings through mutual funds in certain midcap and smallcap companies have increased.
In counters like Sobha, mutual funds increased their holding to 22.63% in the December quarter from 21.80% in the September quarter. Godrej Properties saw mutual fund holdings rise to 5.66% in the December quarter from 4.36% at the end of the preceding three months.
“We believe that small and midcaps remain expensive even after the correction so far,” said Sankaran Naren, executive director and chief investment officer at ICICIPrudential Mutual Fund. “Investors need to exercise caution in this segment. If they choose to invest, a bottom-up approach is crucial, focusing on carefully selecting companies with high free cash flows and sustainable dividend yields.”
Large-cap stocks appear “relatively more attractive” after the recent correction, he added. The benchmark Nifty 50 index has fallen 12% from its record high of 26,277.35 points on 27 September to 23,092.2 on Friday.
Some mutual fund honchos have cut the weight of small and mid-sized companies in their flexicap funds.
“Small and mid-sized companies have seen significant gains, leading to elevated valuations on a one-year forward basis,” said Ganesh Mohan, chief executive, Bajaj Finserv AMC. “The benchmark midcap index is trading two standard deviations above its long-term average, while the smallcap index is at one standard deviation above the same benchmark.”
“In response, we have increased the allocation to large-caps in our flexicap fund to 61%, up from 55%. Concurrently, we have reduced the weighting of mid-caps and small-caps to 39% over the past three to four months,” Mohan said.
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