Small-cap stocks experiencing selling pressure as broader markets underperform

New Delhi, March 11 (IANS) Small-cap stocks faced a significant decline on Monday with the BSE Small Cap Index falling by 1.2 per cent, while the Sensex was down only 0.34 per cent, a drop of 255 points. This decline raised concerns over valuations in the market.

Among the constituents, various companies such as JTL Industries, BCL Industries, Sigachi Industries, Tata Chemicals, Neuland Labs, JM Financial, Arvind Ltd., and IIFL Finance witnessed declines ranging from 5 to 15 per cent.

According to V.K. Vijayakumar, Chief Investment Strategist at Geojit Financial Services, the dominant trend in the market is expected to be the underperformance of the broader market, particularly in the small-cap space.

SEBI has taken regulatory action by asking mutual funds to conduct stress tests in their mid and small-cap schemes to prevent further flow of funds into the over-valued small-cap segment, amidst concerns of a potential bubble formation and its eventual burst.

Despite the market’s consistent climb to new highs, investors are advised to remain invested. While large-caps may see buying opportunities on dips, the broader market is likely to face challenges in the near future, as indicated by Vijayakumar.