A brutal selloff is hammering India’sstock market, with some of the country’s most prized stocks plunging as much as 71% from their peaks. Whether it’s the specter of Donald Trump’s tariff threats, a chilling warning from India’s top contrarian investor S Naren, or an earnings-valuation mismatch finally catching up, the carnage is impossible to ignore.As high-net-worth individuals and family offices join foreign investors in the selling frenzy, retail investors are growing impatient. The relentless exodus of global capital—spurred by Trump’s America First push—has seen foreign institutional investors (FIIs) pull out billions, forcing mutual funds to reconsider their once-steady strategy of buying every dip. But with liquidity drying up, that safety net is starting to fray.The rout is indiscriminate, cutting across blue chips and small-cap stocks alike. Out of 528 stocks with a market capitalization of at least $1 billion (₹8,700 crore), a staggering 412 have sunk at least 20% from their highs. At least 19 of them have suffered deep losses, erasing between 50% and 71% of their value.Even Reliance Industries, India’s most valuable company, hasn’t been spared. The stock hit a 52-week low on Wednesday, and has shed a quarter of its value in this sell-off. For investors who had bet on India’s bull run defying global headwinds, the reckoning is here.”There is definitely some panic, especially in the small and midcap segments. I do not agree with the fact that everything is expensive. There are a lot of pockets where valuations are reasonable,” said Gurmeet Chadha of Complete Circle Consultants, adding that good investors take advantage of corrections and don’t fear.Also read | Mr Contrarian S Naren proved right! Smallcap investors trapped in bear marketKotak Institutional Equities said the behavior of retail investors over the next few weeks or months will determine the course of the Indian market.”Our analysis shows that returns of retail investors have been far lower than returns of SMID indices — retail investors have invested more funds at higher market levels. Could the ‘breaking’ point of investors be a lot closer than is generally believed?,” said Kotak’s Sanjeev Prasad.He said the price-agnostic investment behavior of retail investors and continued purchases of stocks directly and indirectly through domestic institutions had led to overvaluation in the market for the past 9-12 months and prevented a larger and swifter correction in the market.Investors can utilise the current weakness in the market to switch from the mid and smallcaps, which are even now overvalued, to the fairly valued largecaps, analysts say.”The market is in oversold territory and a pull back is likely, but since FIIs are likely to sell into a rally, the upside is capped,” said Geojit’s Dr. V K Vijayakumar.Angel One-backed Ionic Wealth has advised clients to focus on continued staggered addition for the next 2 months, accelerating it if markets correc
Gio. Feb 13th, 2025
