Why some midcap, smallcap stocks are coming under strong selling pressure

After the rise of 1000 points in the Nifty in ten trading sessions, there are signs of huge volatility in the market in the coming days. In some stocks, especially in the broader market, there is excessive speculation, which has taken some stocks to unreasonable levels of valuation. In some cases the PE is above 100, 150 and even 200.”

“The high level of speculation in many stocks is evident from the unusual trading volumes and heavy volatility in these stocks. For example, IRCTC had trading volume ₹9083 crores yesterday and a price improvement of about 15% from the peak. Many broad market stocks saw a fall of more than 5%,” he said.

heavy sales ( ₹2578 crore yesterday) by DII, he said, “shows that smart money perceives the markets to be overvalued and overheated.”

He added that the direction of the market will depend on whether enthusiastic retail investors will again rush to absorb the selloff by institutions.

“At the present time, the security is in high-quality large-caps. The fact that high-quality stocks like HDFC twins, RIL, Infosys, L&T, Kotak Bank and a few others were resilient during the broader market crash, gives the sector an edge. Indicates protection for investors,” said VK Vijayakumar.

For example, after a sharp sell-off towards the close of Wednesday’s session, IRCTC shares continued to fall today as the stock fell over 15%. The stock had touched a record high ₹6,393 per share in Tuesday’s opening session. Similarly, shares of IEX are down about 18% from Wednesday’s intraday high.

Santosh Meena, Head of Research, Swastika Investmart said, “Top-performing stocks have seen a sharp correction over the past few days amid valuation concerns. It was easy for every day traders to make money so we are looking at a weak hand out. Technological improvements to remove,” he said.

“The market is not charitable enough to make you easy money over the long run, so there is a risk of a short-term correction in the market to take out weak hands and this correction could be particularly sharp in individual stocks,” he said. . added.

However, Sneha Poddar, AVP Research, Broking & Distribution, Motilal Oswal Financial Services, said, “If we exclude some very expensive names, this correction provides bottom-up opportunities, which would lead to greater relaxation and growth in the economic sector. Pick-up is being offered. activities, upbeat festive mood and better demanding backgrounds.

“Balance sheet and cash flow continue to improve as corporates tighten costs and deleverage. Going forward, Q2FY22 earnings distribution versus earnings expectation will provide further direction to the market,” she said.