The recent correction in the Indian markets have wreaked havoc in the broader market space with all smallcap stocks entering the bear grip. All stocks in the BSE Smallcap index have fallen over 35 percent from their recent highs.
The BSE Smallcap index is also down 15 percent from its 52-week high. In comparison, the 30-share index Sensex has lost nearly 12 percent from its all-time high hit in October 2021.
Forbes, Suvidhaa Infoserve, Sadbhav Infra, SREI Infra, SVP Global, Sadbhav Engineering, Strides Pharma and Dilip Buildcon has shed over 65 percent each from their respective 52-week highs. Meanwhile, Tata Tele, Gayatri Projects, Solara Active, Sequent Scientific, Yaari Digital, Suryoday Small Finance Bank and Wockhardt is down over 60 percent each.
| Smallcap Stock | % Decline from 52-week high | Decline in last 1 month (%) |
| Forbes & Company | -94% | -93% |
| Suvidhaa Infoserve | -91% | -11% |
| Sadbhav Infra | -73% | -17% |
| SREI Infra | -70% | -10% |
| SVP Global Textiles | -70% | -26% |
| Sadbhav Engineering | -67% | -17% |
| Strides Pharma | -65% | -17% |
| Dilip Buildcon | -65% | -27% |
| Tata Tele | -64% | -40% |
Just in the last 1 month, over 30 stocks from the smallcap index have shed over 20 percent each from the index.
The markets across segments have been reeling under pressure on the back of the ongoing Russia-Ukraine war followed by the US Federal Reserve’s monetary policy decision. The sentiment will also be focussed on additional risks associated with the sharp increase in Crude oil prices and a weakening rupee.
Most experts advise investors to stay away from smallcap stocks for the time being since they are the most prone to volatility amid the uncertainty. However, high-risk investors can look at accumulating some quality smallcap stocks, they added.
"There are good quality stocks amongst smallcap which investors can look at after the fall. But investors should keep in mind that the risk associated with investing in small caps is more than largecaps. Thus due diligence is required before investing is more in case of smallcap stocks," said Nishit Master, Portfolio Manager at Axis Securities.
Experts believe that the volatility is likely to continue for some more time before it concludes on a concrete trend. The direction of the
bond yields, oil prices, and the dollar index, faster tapering by the US FED, and the inflation risk will further drive the market fundamentals in the first half of 2022.
"While the geopolitical and inflation-led uncertainties play out, post the correction we find price-value equation turning relatively more attractive especially in the broader markets on a bottom-up basis," analysts at Motilal Oswal said.
Axis Securities like KIMS, Equitas Small Finance Bank, Praj Industries and CCL products among small-cap stocks.
