Small, mid-caps log biggest weekly decline in 15 months, shows data

Benchmark indices see worst weekly slump in five months

The small and midcap indices ended the week with a loss of around 5 per cent — the highest in 15 months — amid the regulator’s move to contain the “froth” in the market. Blue chip-oriented benchmark indices logged their worst weekly slide in five months.

Domestic equities resumed slide on Friday amid weak global cues as a higher-than-expected US inflation data muddled the outlook for rate cuts. The Sensex ended the session at 72,643, a decline of 454 points or 0.6 per cent. The Nifty fell 123 points or 0.6 per cent to end the session at 22,023.

Both indices fell around 2 per cent each for the week, in what was their first weekly decline after February 11 and the worst weekly fall since October 29, 2023. The Nifty Smallcap 100 index declined 1.5 per cent intra-day before recouping all the losses to finish with gains of 0.4 per cent. The Nifty Midcap 100 fell by 0.5 per cent, extending its weekly loss to 4.6 per cent.

The week was marred by intense volatility following Sebi chief’s comments that “there are pockets of froth in the market and it may not be appropriate to allow that bubble to keep building.”

The fresh data on US inflation added to more turbulence as it dashed the confidence around the number of interest rate cuts this year.

The Fed is expected to keep rates unchanged for the fifth straight month next week. The producer price index (PPI), which excludes volatile food and energy categories, advanced 0.3 per cent from the prior month and 2 per cent from a year ago.

"The US Fed policy outcome and commentary will be important as mixed set macro data has kept investors anxious over the rate cut timeline. Thus, we expect the market to remain volatile in the near term with a focus on largecaps and defensive names," said Siddhartha Khemka, head of retail research of Motilal Oswal Financial Services.

The stress test results of small and midcap mutual fund schemes, used to ascertain their ability to withstand sudden redemption pressures, also kept investors on tenterhooks. The results indicated a divergent trend with funds requiring between 2 and 30 days to liquidate their portfolios.

Deepak Jasani, head of retail research of HDFC Securities, said Nifty has been facing selling pressure on rises, which is expected to continue.

"Nifty could now take support at 21,861 and later at 21,750. On rises, 22,203 and later 22,405 could offer stiff resistance,” said Jasani.

The market breadth was mixed, with 2,106 stocks declining and 1,725 advancing. Four-fifths of Sensex stocks fell. Reliance Industries, which fell 0.98 per cent, contributed the most to the Sensex’s decline, followed by Mahindra and Mahindra, which fell 4.7 per cent.