Smallcaps run risk of extended selloff as earnings slow
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The tide is turning against India’s smaller companies as weak earnings and a souring economic outlook spur a downturn in their shares. Key gauges of small- and mid-sized companies have tumbled since hitting September highs, putting them close to a so-called technical correction of a 10% peak-to-trough decline. The Nifty Midcap 100 Index is heading for its biggest monthly drop since the pandemic, tracking losses in the broader market, while the Nifty Smallcap 250 Index is set to fall the most in more than two years. The meltdown in October, a sharp reversal from a searing rally in such stocks in the previous months, reflects wavering investor sentiment due to cooling earnings momentum. Despite the selloff, the stocks are still trading at high valuations, signaling investors may book profits and chase rallies in other markets such as China. Bloomberg “Many of high beta stocks in this segment were trading at frothy valuations and are typica...