Ajitansh Kar, Gurugram, 20 March 2024
A market correction can arise from an array of technical and fundamental factors, including negative macroeconomic data, changes in the central bank’s interest rates, company results, etc. Madhabi Puri Buch, the head of SEBI, recently voiced her concerns about overvaluation in the small and mid-cap sectors and cautioned investors to an imminent market fall. As has been noted, prices in multiple segments of this market have increased significantly in the last 12 months. The markets frequently engage in different cycles of fluctuating prices. People can always make money and become wealthy through it, but it is important to keep in mind that nobody can time the market precisely. I suggest that rather than worrying about these calls, investors should review their portfolios and look for alarming indications, including triggered stop losses or unfavourable fundamental changes to their holdings.
The Nifty 50 index and large cap stocks maintained their gains with only small corrections, but the Nifty Smallcap 100 index and the Nifty Midcap 100 index experienced 15% and 8% corrections, respectively. The SMEs that were listed on the markets struggled considerably, and the initial public offerings (IPOs) had a lacklustre launch. Based on mutual fund data, there was an inflow of about Rs. 26,866 crore in February, up roughly 23.3% from the previous month. Small and Midcap funds benefitted from this, taking in Rs. 2,922 crore and Rs. 1,808 crore, respectively. Since March 2021, there has been a positive capital inflow into the fund houses. This is encouraging since the money flowing into these schemes would enable them to purchase securities, which would maintain the market’s high level of volatility. This might postpone but not stop an upcoming correction in the area.
Over the past year, several industries including railways, electric vehicles, and the renewable energy sector, have seen extraordinary levels of return of up to 1000%. This has caused prices to rise quickly, outpacing earnings growth and resulting in overvaluation. Pre-election rallies have historically been reported to dominate the markets, and one can anticipate seeing one this year as well.
The Nifty Smallcap 100 index has broken through the 20-day moving average (EMA), and technical charts indicate that this might provide support at the 200-day EMA, which is currently at 13,670. If the 200-day EMA breaks through, additional support could be asserted at 13,075 levels. On the other hand, there are two levels of support for the Nifty 50 index: 21,572 and 21,780, correspondingly.
In the current market environment, caution is advised while purchasing a dip. Before making any decisions, double-check the valuations and charts of the assets you want to buy or the stocks you already own.
