Little stocks in big trouble! 374 smallcaps fall at least 30% from peak. Worst ahead?

Revered as hidden gems by retail investors till a few months ago, hundreds of smallcap stocks are now in bear territory with losses going as high as 84% from 52-week high levels. Some of the biggest victims of the bloodbath, which accelerated after Sebi compared the smallcap boom to irrational exuberance, are high-flying multibaggers.

While the Nifty Smallcap100 index is down 14% from peak, at least 756 smallcap stocks have fallen more than 20% from recent highs. Out of them 374 stocks are down at least 30% from peak while 18 of them have crashed at least 50%, shows data from ACE Equity.

Some of the worst losers are Ramky Infrastructure (down 56% from peak), Andrew Yule (down 48%), IFCI (47%), PTC India Financial Services (47%), AGS Transact Technologies (46%), Swan Energy (40%), Railtel (37%) and RVNL (36%).



The bloodbath has been much deeper in the SME world where more than 90 stocks have lost at least 20% in just one week. Worst losers in the SME pack include Pritika Engineering Components, Cellecor Gadgets, Zenith Drugs, Rachana Infrastructure, Alpex Solar, Knowledge Marine & Engineering Works and Droneacharya Aerial Innovations.

Market experts have been warning investors about the risk arising from the inclination to chase momentum and speculative stocks rather than invest sensibly in a well-balanced portfolio.

The smallcap crash started in February-end when Sebi told mutual funds to establish a framework to protect small and midcap investors from froth building up in the market.

"If you want to protect the investors, they (Sebi and AMFI) are saying please moderate the inflows if you feel fit, raise necessary liquidity to protect and make sure that you have enough to meet any large redemptions if any institutional or big-ticket investors do put in a redemption," Sunil Subramaniam, MD & CEO, Sundaram Mutual Fund, said.

ICICI Prudential AMC has announced to temporarily discontinue subscriptions in midcap and smallcap funds. Other mutual fund houses that have imposed restrictions are Kotak, Nippon India, Tata and SBI MF.

Alok Agarwal of Alchemy Capital Management says the market is trading at above-average valuations but not in a frothy zone, especially if the earnings and capex growth momentum is good.

"In the past, equity markets have rewarded growth and the expectation of growth. India is in a favourable position because Indian markets appear to be robust in terms of both corporate and macroeconomic earnings growth. Although premium valuations make sense, there is only so much room for valuation expansion, particularly in industries with oversupplied and slowing growth. The future looks promising for industries whose growth is accelerating and which are not over-owned," he said.

(Data: Ritesh Presswala)

Also read | Have Sensex, Nifty lost relevance as India's stock market indicator?

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