Smallcap Decimation: How Worse is it Going to Get?
Warning: The Indian Smallcap Market is Under Threat
The Indian equity market closed the month of February with a whimper, not a bang. The Nifty saw its worst monthly decline since the pandemic days, and the smallcap universe was decimated, with 145 stocks plummeting between 25-66%. The carnage was so brutal that about 95% of the smallcaps failed to deliver a return exceeding 1%, and 685 stocks saw double-digit declines.
The Bloodbath in Smallcaps
Suratwala Business took the biggest hit, wiping out a staggering 66% of its value, followed by Best Agrolife, WPIL, Precision Camshafts, Vakrangee, and Oriental Rail Infrastructure, all of which fell by 42% or more. In the BSE500 pack, over 50% of the stocks fell in double-digits, with Ircon International, Natco Pharma, Mahindra Logistics, Sonata Software, and NCC being among the top losers.
Biggest Decliners in NSE
| Stock | % Change |
|---|---|
| Suratwala Business | -66% |
| Best Agrolife | -50% |
| WPIL | -45% |
| Precision Camshafts | -44% |
| Vakrangee | -42% |
| Oriental Rail Infrastructure | -42% |
What’s Next? – The Outlook is Bleak
The Indian economy, already reeling from slowing growth, will face continued headwinds as the pandemic continues to rage on. Rising trade tensions, economic uncertainty, and a slew of global cues will keep investors on their toes. The IT sector, already under pressure, led the decline in February, with the BSE IT index plummeting a whopping 13%.
How Worse is it Going to Get?
Experts are divided on the future prospects of the market. Some predict a worsening of the situation, while others see a brief respite. Vinod Nair, Head of Research at Geojit Financial Services, opines that the market will remain weak in the near term, with a gradual recovery expected only after Q1FY26 and the resolution of global trade policy uncertainties.
Key Events to Watch Out For
- Tariff Policy: A decisive move on tariff policies will have a significant impact on the market.
- US CPI: A hike in US Consumer Price Index could further exacerbate market volatility.
- Jobless Claims: A rise in jobless claims could signal a weakening economy, leading to a further decline in markets.
Technical Analysis
Nifty has breached the crucial support zone of 21,800-22,000, where key indicators converge. Traders are advised to maintain a cautious stance, preferring hedged trades to manage risk.
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