Nifty falls below 22,000; Mid-cap, small-cap shares crash

Stock markets fall: The Indian equity nosedived in noon deals with heavy selling pressure seen in mid- and small-cap shares. The Sensex fell as much as 1.56 per cent and Nifty 50 index touched an intraday low of 21,905.65. The mid- and small-cap shares have been facing selling pressure ever since Securities and Exchange Board of India (SEBI) chairperson Madhabi Puri Buch raised concerns about froth and mid- and small-cap shares.

Nifty Midcap 100 index dropped 3.96 per cent and Nifty Smallcap 100 index crashed nearly 5 per cent. Selloff was so intense that 96 shares in Midcap 100 index were trading lower while 98 shares in Smallcap 100 index were trading with a negative bias.

Earlier this week, SEBI expressed openness to reassessing regulations governing mutual funds' investments in small-cap stocks amid growing concerns about the potentially inflated valuations within this segment. Buch stated that SEBI will consider revising the current rule requiring small- and mid-cap funds to allocate at least 65 per cent of their assets to such stocks if fund managers perceive it as impeding effective risk management.

The remarks came in the wake of mounting apprehensions among regulators regarding certain sectors of the economy and markets exhibiting signs of overheating, attributed to a surge in the equities. Last month, SEBI urged fund managers to take precautionary measures to safeguard investors against the burgeoning speculation in small- and mid-cap stocks following substantial inflows into funds targeting these areas.

Small- and medium-sized company shares have been instrumental in propelling the unprecedented surge in equities over the past year, with funds concentrating on these stocks attracting nearly 40 per cent of the $19.5 billion net equity inflows in 2023.

The sharp fall in Nifty Midcap 100 index and Smallcap 100 index has come after they staged a surge 45 per cent and 55 per cent respectively in 2023.

Meanwhile, selling pressure was broad based as all the major sector gauges compiled by the National Stock Exchange, barring the measure of FMCG shares, were trading lower led by the Nifty Realty index's 4.12 per cent fall. 

Nifty Media, Metal, Pharma, PSU Bank, Consumer Durables, Oil & Gas and Auto indices also fell between 2-4 per cent.

Power Grid was top Nifty loser, the stock fell 5.51 per cent to Rs 269. Adani Enterprises, Adani Ports, NTPC, Coal India, Tata Steel, ONGC, Titan, UPL, Bharti Airtel, Hindalco and Larsen & Toubro also fell between 2-5.5 per cent.

On the flipside, ITC surged 5 per cent after BAT cut its stake in the company. Kotak Mahindra Bank and ICICI Bank were also among the notable gainers.

The overall market breadth was extremely negative as 3,410 shares were declining while 403 were advancing on the BSE.