Small Cap Indices Snap 6-Day Losing Streak, Still In Bear Territory: Is The Bottom In Sight?

Small cap indices snapped their six-day losing streak to end in positive territory on Tuesday, March 4. The Nifty Smallcap 100 index, which constitutes the top 100 small-cap stocks by market capitalisation, rose 0.69 per cent to end at 14,762.60. However, the 938-stock BSE Smallcap index saw a sharper revival, bouncing 1.28 per cent to close at 43,325.88.

The indices, however, are still trading in the bear territory. An index or stock is said to be in bear territory when it falls 20 per cent from a recent peak. Both the BSE Smallcap and Nifty Smallcap 100 indices are down over 25 per cent each from their respective record highs.

Meanwhile, the headline indices ended the day in the red, with Sensex closing 96.01 points, or 0.13 per cent, lower at 72,989.93 and Nifty slipping 36.65 points, or 0.17 per cent, to end at 22,082.65. Sensex is now down about 15.10 per cent and Nifty has corrected 15.96 per cent from their respective life-time highs.

Top Gainers In BSE Smallcap And Nifty Smallcap 100 Indices

Leading the BSE Smallcap index was Coffee Day Enterprises, which skyrocketed 20 per cent to emerge as the top gainer, followed by a 17.84 per cent rally in MPS Ltd. India Cements, NACL Industries, Concord Biotech, Sundaram Clayton, Ramco Systems, Vadilal Industries, and Sun Pharma Advanced Research Company gained between 13-15 per cent each. Manorama Industries, Jyoti CNC Automation, NLC India, Alok Industries, and TCPL Packaging jumped between 10-13 per cent each.

Of the total 938 constituents, 638 stocks advanced and 297 stocks declined, while 3 remained unchanged.

From the Nifty Smallcap 100 index, Jyothy Labs led the gains, rising 7.61 per cent, followed by Ramkrishna Forgings, which gained 5.6 per cent. Blue Star, Swan Energy, Garden Reach Shipbuilders & Engineers, CESC Ltd., Action Construction Equipment, and Sterling and Wilson Renewable Energy gained between 4-5 per cent each.

Of the 100 stocks in the index, 58 stocks advanced, 30 were the losers, and 4 stocks remained around flat levels. 

Have Small Caps Bottomed Out Yet?

According to Vinod Nair, Head of Research, Geojit Financial Services, the broader market outperformed the headline indices today primarily because of value buying opportunities in small-cap stocks.

An ICICI Direct report from March 4 highlighted that historical data over the past two decades shows that during bull market phases, the Nifty midcap and small-cap indices typically correct by 27 per cent and 29 per cent, respectively. In the current scenario, the report suggests that both indices are “approaching extremes of their bull market corrections, indicating limited downside ahead.”