Sentiments – Market Correction and More

The market correction is real. For a layman who doesn’t track the stock market, nothing has changed. The Nifty and Sensex are down just 5% to 7% which is normal for a volatile asset class like equities. But most of the portfolios in the market (Funds, PMS, retail accounts, etc) are down in double digit percentage.

Market Correction

Market Correction Impact

As evident from the table above, the smaller companies are bleeding. Most of the retail portfolios are heavily invested in small & mid caps. Most of the stocks below Rs 10,000 Crores market cap are down by more than 30%.

How many are down?

More than 81% stocks are down by 20% or more. Infact, more than 50% stocks are down by 40% or more. This gives a true image of the market breadth. While the broader indices look fine, the stocks have already undergone a deep correction in value. Moreover, we believe that many stocks will never see their previous highs.

Value Picks

In the sub – 1,500 Crore market cap space, there are many companies across different sectors. Investors should understand that not all sub – 1000 Crore companies can become Rs 10,000+ Crores organizations. Just because a company has fallen 50% doesn’t mean that it cannot fall another 50%. Investors should be careful in selecting the company to invest in. Just because a company’s stock price went up 500% the last time, it doesn’t mean that it will go up 500% the next time too!

Some factors that we would be looking for – Ethical management, improving margins, sustainable earnings growth and the return on capital. Do drop in your comments about the market!

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  1. […] and smallcaps. This is where the pain was in 2018. A lot of stocks had corrected by 50% (Read: Sentiments – Market correction and more) and popular names have trapped […]

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