It’s a rather frightful Friday for the small and midcap stocks in the market today. The key Midcap and small cap Indices ae down over 2% extending the losses seen in the week thus far. This has decidedly been the worst week for the mid and small caps in over 15 months with a significant amount of investor wealth being wiped out.
The BSE Midcap Index is down nearly 1.6% below 42,750 while the BSE Smallcap Index is down over 2% around 50,100. The Nifty Midcap 100 Index is down 2% while the Nifty Smallcap 100 is down over 2.5%.
Market veteran Deepak Jasani attributes this sharp fall to, “continued selling pressure in the large caps is having a domino effect in the mid and small cap space. The FII sell-off is not abetting and the large caps as a result are seeing significant selling pressure. This is now impacting sentiment across the broader market too. Moreover midcap earnings are far from encouraging. Though this has been accounted for, it no doubt impacts sentiment.”
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There are many factors that’s exerting pressure on market sentiment. However, the three key reasons why the stock markets are falling include-
FII selling continues
FII selling in Indian markets has been relentless over the past few months. Foreign institutional investors (FIIs) have sold Rs 60,859 crore worth of equities in Indian markets till January 22, 2025. Between October, 2024 to current week, FIIs have sold over Rs 1.52 lakh crore worth of equities in Indian markets. Softness in corporate earnings, rupee’s continued weakness and the higher valuations of the Indian markets have been some of the reason why the FII outflow continues. At current levels, FIIs are seen reallocating funds to other attractively valued EM peers. The dollar’s strength has also made the US stocks attractive.
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