Stock market today: BSE Midcap, Smallcap rise over 1% each after rout

Stock market today: The BSE Midcap and Smallcap indices saw healthy gains today (March 14), a day after suffering losses of 5 per cent. Both BSE Midcap and Smallcap rose over a per cent each in the morning session of trade on March 14. BSE Midcap index was up 1.02 per cent while the BSE Smallcap index was up 1.6 per cent around 10:25 am while benchmark Sensex was 0.10 per cent up at the time.
Kotak Institutional Equities said that most mid and smallcap stocks are still trading at lofty valuations despite the sharp correction in recent weeks.
“We are not sure if the correction marks a reversal of the market to fundamentals and numbers from sentiment and narratives. If it is the former, many low-quality stocks may still have a long way to go, in our view,” the brokerage firm said.
It also emphasises that high returns have been witnessed over the past three years and expectations of similar returns may have pushed direct and indirect participation of retail investors in the mid and smallcap segments.
Kotak Equities noted, “The mid and small-cap funds of domestic institutional investors (mutual funds) had become ‘passive’ conduits for ‘active’ non-institutional investors who were probably more focused on momentum and narratives than fundamentals and numbers.”
Meanwhile, global brokerage firm Jefferies said that the correction in smallcap and midcap stocks is healthy and does not reflect a larger meltdown.
Jefferies gave two reasons for the selloff spree in small and mid-cap stocks: Sebi chief’s froth warning and ICICI Prudential Mutual Fund move to suspend fresh subscriptions through lumpsum mode into its small cap fund and midcap fund.