Stories
Market Reality: 1 in 5 Shares Down Over 50% Despite Stable Sensex-Nifty; What Next?
- •20.4% of Nifty 500 shares have fallen over 50% from their all-time highs, contrasting with stable index performance.
- •Shares like IRFC and IREDA are down over 60%, while Maruti Suzuki and HDFC Life have seen drops exceeding 30%.
- •Experts suggest the market has not yet seen 'capitulation,' indicating that a sustainable recovery is not confirmed.
- •Foreign investor selling, rising US bond yields, and a weakening rupee are pressuring large-cap shares.
- •Mid-cap and small-cap declines are attributed to expensive valuations and lower-than-expected profit growth.
Key Questions Answered
Large-cap companies have substantial foreign investor stakes. Consequently, they bear the immediate impact of rising US bond yields, a weakening rupee, and capital withdrawal by foreign portfolio investors. Additionally, foreign selling puts primary pressure on these major corporate shares rather than smaller stocks.
Experts indicate that a large number of falling shares can be a necessary condition for a market bottom, but it does not prove the fall has ended. True capitulation and panic selling are not yet clearly visible, and indicators like the India VIX remain low while margin funding positions stay near record levels. Therefore, current trends reflect a gradual weakening due to economic pressures rather than a final market bottom.
Many mid-cap and small-cap shares surged rapidly after Covid, leading to high valuations compared to actual earnings growth. When company profits failed to meet expectations, prices underwent necessary corrections. Furthermore, profit booking and sector rotation played major roles as investors moved capital from previous growth themes like railways and defense into other emerging sectors.
