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Friday, 23 October
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Nifty 5022,600.00−0.39%
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Markets: 23 Oct close
The people’s newsroom

EconomyMarkets

Small and mid-cap shares slide nearly 4% as margin calls hit retail investors

The Nifty Smallcap 100 and Midcap 100 indices are now more than 10% below their 52-week highs after a week of steady selling. Analysts blamed forced selling by leveraged traders, money parked in the Jio IPO and oil above $110.

From the editorial desk · MumbaiPublished
The National Stock Exchange building in Mumbai (file photo)
The National Stock Exchange building in Mumbai (file photo)Photo: zadeus / Wikimedia Commons, CC BY-SA 2.0

Key points

  1. The Nifty Smallcap 100 fell as much as 3.8% to 17,571.60 on Friday.
  2. The Nifty Midcap 100 dropped 3.2% and is over 12.9% below its 52-week high.
  3. The smallcap gauge has lost 7.4% in a week.

Shares of smaller Indian companies took another beating on Friday, with the Nifty Smallcap 100 and Nifty Midcap 100 indices sliding close to 4% as forced selling by retail traders deepened a week-long rout.

The Smallcap 100 fell as much as 3.8% to an intraday low of 17,571.60, taking its loss over the past week to 7.4%. It now stands more than 10% below its 52-week high of 20,187.80. The Midcap 100 dropped 3.2% to 55,208.95 and is down 5.86% for the week and over 12.9% below its peak of 64,450.90.

The selling was far heavier than in the benchmarks. The Sensex and Nifty 50 were down less than 1% in the afternoon, cushioned by gains in large IT companies.

Margin calls, not valuations

Independent market expert Ambareesh Baliga said the sell-off “is not about the valuations, and more about margin calls, which have been hitting retail investors.” Traders who borrowed to buy, or kept buying as prices fell, have been forced to sell to cover losses, feeding the decline.

Other reasons were cited too. Some market participants said money had been pulled out of smaller stocks to bid for Jio Platforms’ record share sale, which closes on Friday. Foreign investors have kept selling, Brent crude is above $110 a barrel on the West Asia conflict, and inflation worries are back.

Ravi Singh, chief research officer at Master Capital Services, pointed to prices that had run ahead of profits, saying “many stocks remain expensive relative to earnings.”

Where support lies

Vipin Kumar, assistant vice-president of research at Globe Capital Market, said the Midcap index had reached a support zone whose lower edge is 54,667, while the Smallcap index was nearing a support band of 17,400 to 17,200. He warned that “a decisive break below these support zones would be a negative development,” with the next stops around 52,000 to 52,500 for midcaps and 16,400 to 16,800 for small caps.