BSE Smallcap index tanks over 17% in 2 months; 131 stocks at 52-week low

Shares of smallcap companies have been under pressure amid tepid corporate earnings growth in the December 2024 quarter (Q3-FY25) and selling by foreign portfolio investors (FPIs).

 

In the past two months, the smallcap index on the NSE has tanked 17.5 per cent its record high level of 57,827.69 touched on December 12, 2024. The index is on the cusp of hitting a 'bear phase', termed as a fall of 20 per cent or more from the recent peak.

 

On Tuesday, the BSE Smallcap index slipped nearly 3 per cent in intra-day deals. At 10:46 AM; the BSE Smallcap index, the top loser among broader indices, was down 2.65 per cent at 47,739.69 levels. In comparison, the BSE Midcap index and BSE Sensex were down 2.2 per cent and 0.5 per cent, respectively. 

 

Analysts expect this painful phase for the small-cap stocks to continue for some more time, at least till the corporate earnings start to show signs of improvement. The relentless selling by foreign investors amid global developments, too, is a cause for concern.

 

“I expect the pain in the midcap, smallcap and microcap stocks to continue for at least a quarter more. A lot will depend on how corporate earnings play out and how the global cues shape up. At the current juncture, investors will be better off staying away from the smallcap and microcap segments,” advised Gaurang Shah, senior vice-president at Geojit Financial Services.

 

Smallcap stocks at 52-week low

 

Total 131 stocks from the BSE Smallcap index have hit their respective 52-week low in intra-day trade on Tuesday. The list includes Delta Corp, Honasa Consumer, JK Tyre, Mishra Dhatu Nigam, Tata Chemicals, NCC, RITES, Motherson Sumi Wiring India and SKF India.

 

Out of 936 stocks from BSE Smallcap index, as many as 433 stocks have seen their market value decline over 20 per cent in the past two months. Of these, the market price of 100 stocks slipped between 30 per cent and 40 per cent.

 

Total 17 stocks, including Netweb Technologies India, Jupiter Wagons, Vakrangee, GE Power India, Sterling and Wilson Renewable Energy and Jai Corp, have declined more than 40 per cent.

 

Despite the concerns, G Chokkalingam, founder and head of research at Equinomics Research suggests investors start accumulating small-and mid-cap stocks on a decline from a long-term perspective. 

 

If the market corrects, investors, he suggests, should increase their allocation to equity asset class and start accumulating quality small-and midcap stocks again in phases from till mid-March 2025. He expects selling pressures in both these segments to come down drastically before the end of March 2025.

 

“Even if FIIs don’t return as significant buyers of Indian equities in the short-term, new retail investors are likely to continue to invest and would largely focus on small-and midcaps. The risk to our optimistic view on these two market segments would be any possible further slip in GDP growth below 6 per cent, or steep spike in global crude oil prices,” Chokkalingam said.

 

Technical chartists, too, suggest that the overall structure of the Indian stock markets is weak and prone to a further downside in the weeks ahead. A fresh sell-off, they said, is possible if the 20-day simple moving average (SMA), or 23,300 (Nifty) / 77,000 (Sensex) is broken.

 

"Below this, the indices could retest the range of 23,220-23,175 / 76,700-76,500. On the other hand, 23,500/77,600 will be the main resistance zone for the bulls. Above this level, the pullback can extend towards 23,560/77,800. The strategy should be to buy Nifty if it forms a bullish reversal formation after hitting the level of 23270-23220 levels on intraday charts. Keep a stop loss at 23200 level,” said Shrikant Chouhan, head of equity research at Kotak Securities.