Small and mid-cap stocks have plunged by 15%, raising concerns about a bear market. Tightening liquidity and slowing domestic growth are major factors. Analysts warn of stretched valuations and weakening credit cycles, signaling more downside risks.
The markets have entered a sharp corrective phase due to heightened volatility, an FII sell-off, and tightening liquidity. The small and mid-cap segment has fallen by 15% since the end of September, a sharper decline than their large-cap peers.
The BSE400 small and midcap index is poised for its fifth 20%+ correction post-GFC. Analysts at Nuvama Institutional Equities suggest this downturn could be the start of a bear market. Domestic growth is slowing, and durable liquidity is slipping into a deficit. Despite the 15% correction, SMID valuations remain high.
