The Sensex ended 237 points, or 0.5 per cent higher, at 51,598. The Nifty50 Index rose 57 points, or 0.4 per cent, to 15,350.
In the previous session, both indices had finished at their lowest levels since May 2021 after dropping over 7 per cent in six straight sessions. Stocks in the broader market continued to hit fresh multi-month lows.
The Nifty Smallcap 100 Index fell 3.2 per cent to end at 7,983, while the Nifty Midcap 100 Index fell 2.3 per cent to close at 25,293. The sharp diverge in performance between large-caps, and mid- and small-caps was a sign that pain in the broader market is far from over, observed experts. It is also an indication of thinning retail investor interest, they added.
“Most buyers in small- and mid-caps are retail investors. When the market goes down, retail investors stop buying. They don’t sell at a loss unless they are forced to, whereas high networth individuals (HNIs) and smaller funds holding the stock sell. That is why you see stocks falling in large volumes. There is selling by HNIs and institutions, and the stocks fall because there are no buyers,” said Ambareesh Baliga, an independent equity analyst.
The small- and mid-cap indices are already in bear-market territory, having plunged 35 per cent and 23 per cent, respectively, from their peaks. The sharp fall comes following a hawkish pivot by the US Federal Reserve and other global central banks to control runaway inflation. The monetary tightening has led to derating of stocks as markets align with the end of the ‘easy money’ regime.
Market players said retail investors who arrived at the party late are sitting on huge losses.
“But what happened in the past few months is that even primo small-caps have seen erosion in wealth. Liquidity has dried up. And macro factors are not offering any comfort either. Foreign portfolio investors (FPIs) continue to sell. The rupee is falling. There are still no signs of thaw between Russia and Ukraine. We will have to endure the pain for another month at least,” said Chokkalingam G, founder, Equinomics Research & Advisory.
FPIs sold shares worth Rs 1,217 crore on Monday, while domestic investors were buyers to the tune of Rs 2,000 crore.