Bears continue to roar as small and mid-cap stocks log worst week in 15 months; Sensex down 454 points on Friday

• From the Sensex basket, Mahindra & Mahindra, Tata Motors, NTPC, HCL Technologies, Larsen & Toubro, Infosys, Tech Mahindra and State Bank of India were the major laggards
  
• Foreign Institutional Investors (FIIs) offloaded equities worth Rs 1,356.29 crore on Thursday, according to exchange data
  
• Brent crude rising to $85 and the 10-year US bond yield spiking to 4.29 per cent are headwinds for the market
  

The markets are in the midst of a bear grip. Equity benchmark indices declined over half a per cent on Friday after a day's breather amid weak global market trends and foreign fund outflows. The 30-share BSE Sensex declined 453.85 points or 0.62 per cent to settle at 72,643.43 after a weak beginning.

During the day, the benchmark tanked 612.46 points or 0.83 per cent at one point and recovered marginally thereafter. The NSE Nifty also dropped 123.3 points or 0.56 per cent to 22,023.35.

This week has been particularly challenging for the small and midcap stocks as they logged around a 5% drop, making it their worst week in 15 months since December 2022, as per the Economic Times. As stress test results indicated a disparity in the durations that funds would take to liquefy their portfolios, there have been rising concerns of froth in these segments.

"Cautiousness towards mid and smallcaps continued to drag market sentiment, dampening the broader market. However, the moderation in global commodity prices and the upward revision of India's GDP for FY25 are poised to highlight robust domestic demand, potentially supporting a rebound once the broader market attains stability," said Vinod Nair, Head of Research, Geojit Financial Services.

From the Sensex basket, Mahindra & Mahindra, Tata Motors, NTPC, HCL Technologies, Larsen & Toubro, Infosys, Tech Mahindra and State Bank of India were the major laggards. Bharti Airtel, Bajaj Finance, Bajaj Finserv, Tata Consultancy Services and IndusInd Bank were among the gainers.

In Asian markets, Seoul, Tokyo and Hong Kong settled lower, while Shanghai ended in the green. European markets were trading with marginal gains. The US markets ended in negative territory on Thursday.

Foreign Institutional Investors (FIIs) offloaded equities worth Rs 1,356.29 crore on Thursday, according to exchange data.

In the broader market, the BSE midcap gauge slipped 0.51 per cent while the smallcap index went up by 0.25 per cent. An indication of stress in these segments could prompt regulatory intervention by the SEBI, potentially influencing sentiments across the broader market.

"Even without stress tests, the broader market valuations are expensive, and in some pockets, valuations are frothy. This is clearly unsustainable. Even when prospects for certain sectors are good, valuations have run ahead of fundamentals. Low floating stock in many segments has resulted in prices shooting up," says V. K. Vijayakumar, Chief Investment Strategist, Geojit Financial Services.

"The rebound in the market on Thursday after the Wednesday crash was unlikely to be sustained. Brent crude rising to $85 and the 10-year US bond yield spiking to 4.29 per cent are headwinds for the market,” he adds.

The BSE benchmark climbed 335.39 points or 0.46 per cent to settle at 73,097.28 on Thursday. The NSE Nifty gained 148.95 points or 0.68 per cent to 22,146.65.

With inputs from PTI and IANS