The Nifty Midcap 100 and Nifty Smallcap 100 indices continued their downward trajectory, increasing losses during Wednesday’s trading session. Today, the indices fell by as much as 2.5 percent. On January 21, the index experienced declines exceeding 2 percent, reflecting ongoing selling pressure this month.
The Nifty Smallcap 100 index has been the most severely impacted, plummeting 9.2 percent thus far in January 2025. Analysts point to high valuations, ongoing selling by foreign institutional investors (FIIs), and profit-taking as significant factors affecting market sentiment.
The Nifty Midcap 100 index has lost 7.7 percent this month. Persistent Systems, Prestige Estates, and Oberoi Realty have been among the largest decliners in the midcap sector, each dropping by up to 8 percent.
The recent downturn in small and midcap indices, marked by a steep 5 percent decline over two trading sessions, is primarily attributed to valuation concerns, macroeconomic headwinds, and profit-taking by investors.
Investors are advised to proceed carefully with the Nifty and Sensex reaching multi-month lows and broader indices lagging. Analysts suggest concentrating on quality stocks with robust fundamentals amid the current market volatility.
Such corrections are generally beneficial in the long run, as they adjust valuations to more sustainable levels, providing opportunities for long-term investors to reinvest in quality stocks at more attractive prices. For those investing in small and midcap stocks, the emphasis should be on fundamentally sound companies with clear growth prospects, while steering clear of speculative investments during turbulent times.
