In the last two sessions of profit booking, after 7 straight days of gains which propelled the indices to record highs of 18600 levels on the Nifty and easily taken out 62,000 levels on the Sensex, what suffered the most has been the broader markets.
The Nifty Mid cap 100 index from Tuesday's record highs hit levels of 33243.5 came down to levels of 31478.3, a correction of 5.3 percent in just 2 sessions, this is bountiful and similar has been the case for small caps.
Stocks contributing to the most weakness in the mid cap index include IRCTC, Deepak Nitrite, Hindustan Zinc, Aarti Industries and PI.
Now in the days to come the similar correction in the space shall persist. "After the 1000 point rally in Nifty in ten trading sessions the market is showing signs of high volatility in the days ahead. There is excessive speculation in certain stocks, particularly in the broader market, which have taken some stocks to unjustifiable levels of valuations. PEs in some cases are 100, 150 and even above 200," says VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
Notably correction in some of the stocks that had been the top performers for some time now is also on account of valuation concerns.
"The high level of speculative froth in many stocks is evident from the abnormal trading volumes and huge volatility in these stocks. For instance, IRCTC had trading volume of ₹9083 crore yesterday and a price correction of around 15% from the peak. Many broader market stocks witnessed corrections of above 5%," he said.
So, now amid the rapid and aggressive selling by DIIs as well as foreign investors, the market direction shall be likely be determined by whether or not retail investors try to capitalize on the current corrective mood.
Nonetheless what continued to be resilience without major shocks have been the good quality stocks such as RIL, Infosys, HDFC twins etc. and hence are safe for investors.