Some of the the biggest losers included Power Grid Corporation, Coal India, Adani Enterprises, NTPC, Tata Steel and ONGC falling over 5-7%. Adani Group stocks, which got hemorrhaged last year around this time, dropped like a rock on Wednesday too. All the 10 scrips traded in the red, wiping out Rs 90,000 crore off their combined market capitalisation.
Mid and small cap indices have outperformed the Nifty 50 by 30-50% in the last one year, perhaps led by strong fund flows that touched a cyclical high. In contrast, large cap stocks saw outflows hitting a cyclical low. As a result, mid and small cap stocks were trading at a significant premium to large cap.
The good news is that analysts reckon that mid and small caps aren’t really up to their necks with trouble, but agree that the ongoing correction in prices is much-needed. Besides valuation concerns, they see no other fundamental dangers lurking around that could dent India’s long-term growth image.
Meanwhile, Asian markets remained mixed, thanks to a modest decline in the US market on Wednesday.
The pace for the rest of the week will likely be dictated by the US February retail sales data and weekly jobless claims data due Thursday. Broadly though, the belief persists that the US economy is sleep-walking into a slowdown, and potentially into a recession by the second half of 2024.
This means gold and long-dated Treasuries may remain strong, while equities may have to brace for volatility. Even though the dollar remained steady, the rupee remains the best performing Asian currency in 2024, having strengthened 0.4% against the dollar so far this year.
Moreover, it is an election year for several economies including India.
Compared with several other emerging and advanced economies, India’s growth metrics appear relatively robust. The anticipated cyclical upturn, a full-blown capex cycle, robust demand and expected interest rate cuts in 2024 may all help prevent investors’ faith from going sour.
