MUMBAI: The strong rally witnessed on the bourses during the past two months seems to be slowly losing steam with the first major casualty being the small and mid-cap stocks. On Wednesday, investors offloaded small and mid-cap stocks in large quantities pulling down the BSE small and mid-cap index by 1.65 per cent and 1.12 per cent respectively.
Overseas investors have significantly scaled down their daily purchases and even the Sensex and Nifty are finding it difficult to hold on to their recent gains.
Registering their fourth consecutive day of loss, the Sensex ended the day at 22,417.80, down 48.39 points or 0.22 per cent while the Nifty closed the day at 6,696.40, down 18.85 points or 0.28 per cent.
The provisional data from the stock exchanges showed that FIIs purchased shares worth Rs 454.48 crore. “Weaker hands are now exiting the markets,” pointed out Arun Kejriwal, director, Kejriwal Research and Investment Service (KRIS).
“Both the domestic and overseas investors who had participated in the recent rally without a strong conviction are lightening their positions ahead of the announcement of the poll results. This is actually good for the markets as they won’t see a major knee-jerk reaction or wild swings if the speculative positions are less,” he added.
On Wednesday, out of 2,921 stocks traded on the BSE, 1,845 stocks ended deep in the red as compared to 927 stocks that advanced. “As we have seen in the last few months, India has experienced a strong pre-election rally. Further momentum in the rally will depend on the outcome which is still some time away. This continued rally has increased the short-term risk profile of the market as indicated by India’s volatility index and high cost of carry, which will continue to put pressure on the stock indices,” said Vinod Nair, head of fundamental research, Geojit BNP Paribas Financial Services.
