Wednesday turned out to be terrible for the bourses as concerns raised by SEBI about froth sent smaller stocks to their worst single-day drop in more than two years. The gauges of small and mid-cap stocks plunged more than 4% each, while the main S&P BSE Sensex Index tumbled 1.2% to erase this month’s gain.
The declines took with them almost all of the 1,139 members of the S&P BSE AllCap Index. The S&P BSE Small Cap Index has lost more than $40 billion in market value in less than two weeks after the regulator flagged risks of overheating in shares of smaller companies.
About 15% of the index’s 946 members have erased a fifth or more of their value during this period. Some investors anticipate the losses to deepen.
Who said what on the meltdown Dalal Street saw on March 13:
Uday Kotak: While there is some froth in the market, it has not yet escalated into a full-fledged bubble, indicating the situation is not entirely beyond control
Nilesh Shah, managing director at Kotak Asset Management: Low-float stocks are creating some form of froth in the market. The regulator should do more to put guard rails around mid-and small-cap plans
Shankar Sharma, GQuant & First Global, Founder: The only train you should jump off when it's going at full speed, and not when it's slowing down, is a Small Cap Bullet Train
NSE MD and CEO Ashishkumar Chauhan: Small investors with no capacity to manage high risk levels shouldn't enter riskier parts of markets.
Porinju Veliyath, founder and portfolio manager at Equity Intelligence: This space was too hot and the correction may not be completed in a hurry. There is still a lot of froth in many pockets.
Raamdeo Agarwal: If market falls 10-15%, it will be good for long term health of the market. Because if you look at this history of market cycles, whenever markets see a parabolic rise, they tend to crash.
White Oak Capital's Prashant Khemka: Equity markets can't be a one-way street. There was overconfidence setting in among investors particularly in small caps. This is a healthy, not worrisome correction.
Sandeep Raina, Nuvama: Is it the bottom? I do not know frankly. But is it a case of there is nothing but a bloodbath going forward and we should sell the equities? Not at all. Just stay calm, stay invested.
Harsha Upadhyaya, CIO-Equity, president, Kotak Mahindra Asset Management: The stocks have gone up crazily in recent times and not in all cases they have gone up with the support of fundamentals. It is very difficult to assume that this decline is going to stop in the very near term
Gurmeet Chadha, Compcircle: In small caps , it takes 3-5 days to wipe out 3-5 months returns...that’s the nature of the game. Hence never invest seeing short term performance
Rajesh Bhatia, ITI Asset Management: Exiting investments is advisable in instances where there are unsustainable earnings or other indicators of overvaluation
Gaurang Shah, Geojit: Given the historical volatility of small and midcap stocks, it's crucial for investors to exercise caution in allocating funds, whether directly in stocks or through mutual fund SIPs
Market veteran Shyam Sekhar: Most of the returns in smallcap funds is essentially beer froth. Impact cost is what people seem to mistake for returns. Continuously buying the same set of shares has raised all boats. It has little to do now with fundamentals. Now, a selling spree can teach a lot of one trick ponies real investing. The trigger has been pressed