Indian small-cap stocks are taking a hard hit as investors who bought shares with borrowed money face margin calls. The benchmark Nifty 50 Index closed lower for a fourth straight session on Friday as higher oil prices weighed on sentiment, but the selloff has hit smaller names even harder. A gauge of small-cap stocks suffered its steepest fall in over five months, erasing its year-to-date gain. That marks a sharp reversal for a segment that had held up through the broader market decline, helped by strong local mutual-fund flows. The decline has been amplified by retail investors unwinding leveraged bets, since smaller stocks account for a large share of margin-funded positions.
Analysts are now watching whether the losses will slow mutual-fund inflows into small- and mid-cap funds or even trigger redemptions, according to Ambareesh Baliga, an independent research analyst in Mumbai. Relief may come from a drop in Brent crude prices and a steady open for Asian stocks. Investors will also watch the Federal Reserve's meeting and earnings from Microsoft, Alphabet and Amazon.com. Locally, the trading debut of Jio Platforms after its record $3.1 billion IPO is the main focus.
In quick commerce, investors are increasingly betting on Eternal as the likely winner in India's prized sector. Swiggy shares suffered their biggest-ever drop on Friday after a disappointing second-quarter report, while Eternal rose 4%. Eternal's market value, roughly twice Swiggy's at listing, has now grown to more than six times as large. Swiggy trades at less than half its issue price, even though 23 of 30 analysts covering the stock still rate it a buy.
RBI Governor Sanjay Malhotra said the central bank can use interest rates to address financial-stability risks if needed, as analysts expect pressure on the rupee to increase.
Source: Bloomberg Markets · Summarized by HeadlinesBriefing