The markets have fallen for a mere two weeks in the new calendar year and they seem as if they have been falling for an eternity. The fall in midcap and smallcap has been quite severe during the week ending on Friday the 15th of January. The indices indicate that BSEMIDCAP fell 5.90% and BSESMALLCAP 7.46% against the BSESENSEX losing 1.92% and NIFTY 2.15%. Many stocks have lost 35-50% and more,and were locked at down circuit for most part of the week.
Global markets have been falling and Dow Jones lost 3.59% for the week closing below 16k, a level last seen in August 2015. The levels on the SENSEX of 24,455 and 7,438 on the NIFTY were seen in May 2014. To put it in yet another way Modi gain has gone. This is a big correction and we had at the peak in March 2015 touched levels of 30k on the SENSEX and 9,100 on the NIFTY. If one were to look at the same in a different perspective, SENSEX has lost 5500 points or over 18% from the top while NIFTY has lost 1650 points. This is a severe fall and the worst may not yet be over. Geopolitical tension and falling crude oil and commodity prices continue to be issues that world markets are grappling with. No immediate resolution of the same looks likely.
The correction in midcap and smallcap which has begun is unlikely to be over in a jiffy. The run-up has been huge and the difference in valuations of large cap and these stocks is anywhere between 1.5x and 2x. Such corrections take a significant amount of time but the damage has set in. Value loss was significant in the last week.
Political issues abound in India and one is not sure how to read the Congress Vice President’s comments to a management institute in Mumbai over the weekend concerning GST. He said that if some three points put forward by the Congress on cap of GST rate, dispute resolution mechanism and no interstate tax of 1% were introduced, they were willing. The problem is comments made by anyone in Congress cannot be taken at face value. If however the same does come true, GST could become a reality next month. Keep your fingers crossed and hope for the best.
On that positive note let us hope that markets improve as soon as possible, as current indications are that we would have yet another poor Monday opening on account of sharp fall in US markets on Friday.
