Market Crash: Bears prowled on Dalal Street on Wednesday, March 13, with the benchmark S&P BSE Sensex and Nifty50 indices falling over 1 per cent in intraday trade today.
The smallcap index fell 5 per cent to record the worst single-day fall since December 2022, midcaps lost 3 per cent while microcaps and SME stock indices fell around 5 per cent each as the stellar rally in the broader market is seen taking a pause.
The market capitalisation of all BSE-listed stocks fell by Rs 13 lakh crore to Rs 372 lakh crore.
“Investors should focus on the sustained weakness in the broader market, particularly the small-cap segment. The excessive valuations in these segments, driven by the irrational exuberance of retail investors, has been a concern for many months now. But it has taken the strong message from the regulator Sebi to trigger a correction. Persistent selling, along with actions from mutual funds, indicate there is more pain ahead,” said VK Vijayakumar, chief investment strategist, Geojit Financial Services.
Here are the key factors behind the fall in Sensex, Nifty, and Small-Caps:
Sebi Stress Test: Sebi stress test could be a major reason for the crash as Sebi chairperson Madhabi Puri Buch put out a froth warning on smallcaps and midcaps. After the market regulator asked mutual funds last month to put in place a system to protect interest of smallcap and midcap investors, Madhabi Puri Buch said, “There are pockets of froth in the market. Some people call it a bubble, some may call it froth. It may not be appropriate to allow that froth to keep building.”
Sebi chief also warned that valuation parameters are off the charts and not backed by fundamentals leading to “irrational exuberance”.
Profit booking in large-caps: 26 of 30 Sensex stocks, and 46 of 50 Nifty stock were reeling under pressure on Wednesday. PowerGrid, and Adani Enterprises shed 6 per cent each, Adani Ports 5.5 per cent, Coal India 5.4 per cent, and NTPC 5 per cent.
That apart, Tata Steel, ONGC, Titan, Hindalco, Bharti Airtel, L&T, Tata Consumer, Tata Motors, HUL, Hero MotoCorp, Axis Bank, IndusInd Bank, JSW Steel, Reliance Industries, Maruti Suzuki India, and Bajaj Auto declined in the range of 1 per cent to 4 per cent.
Technical outlook: The Nifty index has a formidable resistance between 22,410 and 22,450, which poses a challenge to any upward momentum.
“Should the Nifty falter below 22,300, renewed weakness is anticipated, albeit with some support anticipated around the 22,200-mark. If the Nifty fails to hold above 22,200, the potential for a downturn towards 21,860 becomes increasingly plausible,” said Anand James, chief market strategist, Geojit Financial Services.
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