Sell-off may lure investors, but valuations to remain frothy, says expert

Stock prices have come under severe selling pressure with only a few companies currently sustaining the gains made last year. 

The trend is more pronounced in the small-cap space, where only five per cent stocks are currently trading near their one-year highs, while two-thirds have come off by more than 30 per cent. The trend is not much better among midcaps, where 78 per cent stocks are down by at least 10 per cent and 31 per cent have come off by 30 per cent or more. 

Even the large caps are not immune to the latest correction — half of the Sensex components are currently off at least 10 per cent from their highs, with only two — HDFC Bank and TCS — currently around their all-time high. Valuation concerns after the last year’s stellar rally has triggered the sell-off, which has only accelerated after the Union Budget. Analysts advice investors to stay careful while dealing in shares of mid cap and small cap companies. “The sharp sell-off may lure new  investors, however, valuations continue to remain frothy,” said a broker.

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