Nifty Midcap, Smallcap 100 sink over 2%; LG, Groww, Hind Copper down 6%

Electronics India and Billionbrains Garage Ventures (Groww) were the top losers from the Nifty Midcap 100, falling up to 6 per cent each.

Equity benchmark indices Sensex and Nifty tumbled on Monday as the ongoing war in West Asia continued to rattle markets globally. The selling was intense in the broader market, with both Nifty Midcap 100 and Nifty Smallcap 100 crashing more than 2 per cent each.

 

As of 10:55 AM, the Nifty Midcap 100 was down 2.05 per cent, trading at 52,989, with only a few stocks in positive territory. NALCO, SAIL, Oil India, and The Phoenix Mills were the only gainers.

 

LG Electronics India and Billionbrains Garage Ventures (Groww) were the top losers, falling up to 6 per cent each. ICICI Prudential Asset Management Company, Mahindra & Mahindra Financial Services, and Lenskart Solutions were down in the range of 4 to 5 per cent.

 

 

At the same time, the Nifty Smallcap 100 lost 2.17 per cent, trading at 15,281. Only 10 stocks were in the green, with Urban Company rising 4 per cent, followed by MRPF and Natco Pharma.

 

Hindustan Copper emerged as the top loser, dropping more than 6 per cent, followed by City Union Bank, Pine Labs, Triveni Turbine, and Brainbees Solutions (Firstcry), each down more than 5 per cent.  What are mid, smallcap stocks are falling?  Sunny Agrawal, head of fundamental equity research at SBI Securities, said that the entire selling pressure is largely due to the ongoing tensions in the West Asia and that there are no signs of clear communication or resolution to the crisis. This, he said, has created uncertainty.  "Until there is clarity on this war, energy prices along with supply disruptions, will continue to have multiple repercussions, which could negatively impact equity markets," he said.  Oil prices surge   Notably, Brent crude rose over 3 per cent to $116.12 per barrel, and the US West Texas Intermediate surged to $102.96 per barrel on Monday morning. Since the start of war, crude prices have climbed more than 50 per cent.

  India depends on imports for approximately 85 per cent of its crude oil needs. This makes the southeast Asian country highly vulnerable to global oil price volatility. If crude prices remain at elevated levels for long, it could widen the country's current account deficit (CAD).  According to Sunny, if crude oil continues to trade above $100 for three-four months, in that scenario, inflation may rise, import bills may face continued pressure, and this could weaken the currency further. Additionally, foreign institutional investors might accelerate outflows, putting further pressure on the markets. 

"If the war reaches a resolution and crude prices return to $70–80, the scenario would be similar to what it was a month ago," he said.  Where is the buying opportunity?  Within midcap and smallcap segments, the analyst said that investors need to be selective. There are still 15-20 stocks like Acutaas Chemicals, TD Power, Lumax Auto, and Bajaj Consumer, delivering relatively better performance in the current market. "These few companies have not corrected significantly during the recent market decline," he said.  Additionally, after significant corrections over the last 18 months, valuations in some of the mid and smallcaps have become comfortable.  'Invest in mid, smallcaps via mutual funds'   Sunny added that in case someone doesn’t have the ability to select stocks from the ID and small-cap segments, “mutual funds are the right way to invest and add units at lower NAVs.”

 

Notably, the broader markets have been under pressure ever since the start of tensions in West Asia, involving the US, Israel and Iran. Since the start of war, the Nifty Midcap 100 index has crashed over 6,000 points or 10 per cent, while the Nifty Smallcap 100 has lost more than 1,600 points or 10 per cent.    ========================== 

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