81 smallcaps fall in double-digits as markets follow sell-on-news trend. Is there reprieve in Budget week?

Domestic markets concluded the week on a sombre note, with a sell-on-rally sentiment prevailing. Analysts say the market is following a sell-on-news trend even though third quarter results are broadly in-line with the expectations.

The current correction is driven by a combination of factors, including tapering, an earnings slowdown, elevated valuations, and trade uncertainties.

During the week, only 4 smallcap stocks delivered double digit weekly returns. MPS was the top gainer in the smallcap pack with 24% return, followed by Fairchem Organics (17%), Capri Global (12%), and Zensar Technologies (10.7%).


On the contrary, 81 smallcaps fell in double-digits. Newgen Software, Cyient, The India Cements, Pearl Global Industries, Netweb Technologies, Sundaram Clayton, Sterling Wilson and a few others were the top losers.

In the midcap segment, none of the stocks saw double-digit rise. However, Go Digit, Coforge, Mphasis, Persistent Systems, Laurus Labs and United Breweries gained up to 8% during the week.

Among the Sensex pack, Kotak Bank topped the charts with 7% returns, followed by Ultratech at 7% and Tech Mahindra at 3.8%.

What should investors do?

Going forward, Key events, such as the FOMC meet and Union Budget, will likely influence the market sentiment. Expectations for the Union Budget remain subdued. However, the conclusion of this major event without any negative surprises could help alleviate market concerns.

Analysts say the uncertainty surrounding Trump's economic policies and high valuations may impact the stock market in the short term, especially in emerging markets.

"We believe the market is now in the final phase of consolidation. With the broad market having corrected by 14%, the downside appears limited, supported by strong long-term economic fundamentals," said Vinod Nair, Head of Research at Geojit Financial Services.

"If the earnings growth reverts to the long-term average of 15% in FY26, we can expect the market to move out of the negative trend. For long-term investors, this is an opportune time to remain patient and adopt an accumulation strategy," Nair said.

Technically, after the formation of the Doji pattern in last week, the market was not able to show any significant upside bounce this week and closed lower by 0.5%

"The near-term trend of the Nifty remains weak. A slide below the immediate support of 22975 levels could open the next downside towards 22800 levels. Any upside bounce towards 23350-23400 could be a sell-on-rise opportunity," said Nagaraj Shetti of HDFC Securities.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)