Midcap and Smallcap Stocks Rebound by Over 1% After Previous Day’s Losses; Expert Advice for Investors

After a significant drop of 5% in the previous session, midcap and smallcap stocks showed a positive trend on Thursday morning. The BSE Midcap index rose by 1.02%, while the BSE Smallcap index surged by 1.6% around 10:25 am. At the same time, the benchmark Sensex was up by 0.10%.

The recent decline in mid and smallcap stocks was driven by concerns about their high valuations. Experts had been warning about inflated prices in these segments, leading investors to take profits.

Kotak Institutional Equities noted that despite recent corrections, many mid and smallcap stocks are still trading at high valuations. They suggested that if the market correction reflects a return to fundamentals rather than sentiment, many low-quality stocks might still have further to fall.

Experts believe that the smallcap segment may undergo further correction as valuations remain elevated. They advise investors to focus on quality largecap and midcap stocks instead.

V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, suggested that the recent market turbulence presents opportunities for selective investment. He recommended accumulating high-quality stocks in sectors like private sector banks, capital goods, telecom, and autos. Despite the market volatility, he emphasized that India’s macro fundamentals remain strong, and the overall bull market is still intact.