Returns from midcap index turn negative in 2022

Returns from midcap index turn negative in 2022

By Siddhant Mishra

The BSE midcap index slipped into the negative territory for 2022 on Friday, with the markets witnessed a huge fall. The index crashed 858.44 points, or 3.40%, to 24,426.79, on a day the Sensex slumped by almost 1,000 points to end below the 60,000-mark. Year to date, it has declined 2.18%.

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P&G Hygiene and Lodha Group were the only ones who escaped the bearish sentiment to end in the green, rising 1.11% and 0.06%, respectively. Banks were at the receiving end, with IOB crashing more than 14% and Union Bank down more than 11%.

The index has seen quite a swing, having fallen below the 21,000-mark in June. As of Friday, it has tanked over 7% since its 52-week high of 26,440.81 achieved on December 14.

“This was due to strong economy-related data from the US, which will keep interest rates high, thereby reducing inflows to EMs. The unusual Covid surge in China will keep Asian peers down, indirectly affecting markets that are doing well. Valuations will also remain expensive for those countries. They will fail to attract value-buying, rather may invite further profit taking,” said Shrikant Chouhan, head of equity research (retail), Kotak Securities. He added that this has impacted especially global-centric stocks such as IT, metals, and chemicals. It will attract profit taking in stocks with high valuation.

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Agrees Sujan Hajra, chief economist and ED, Anand Rathi Shares and Stock Brokers, saying: “Interest-sensitive sectors including financials, capital goods and realty, as well as global cyclicals like oil & gas and metals, have been at the forefront of significant market movements. Export-oriented sectors like IT and pharma have also seen considerable volatility.”

The BSE smallcap, which has been at the receiving end of similar bouts of volatility, has slumped close to 7.5% since the beginning of the year. It has crashed close to 13% from its 52-week high on January 18 this year.

Nitasha Shankar, head (PRS Equity Research), YES Securities, said the volatility and outflows could be attributed to higher valuation vis-à-vis the benchmarks, weaker-than-expected earnings in the September quarter and investors seeking safety.

“The markets are still trading at a 15-20% premium despite a timely correction in 2022, and could see further consolidation before valuations become reasonable for fresh entry points.”