614 stocks freeze in lower circuit amid SmallCap rout; Tata Invest sinks 5%

Over 600 stocks were locked in their respective lower circuits on BSE in Tuesday's trade with no buyers seen in these counters as the sharp sell-off in small and micro-cap stocks continued for a second day amid regulatory concerns.

At 11:30 am; as many as 614 stocks were locked in the lower-circuit. Total 34 stocks from the S&P BSE Smallcap index were frozen at the 5 per cent lower circuit, including Tata Investment Corp, Dredging Corp, Waaree Renewable, Apollo Micro Systems, Himadri Speciality Chemical and Inox Wind.

The S&P BSE Smallcap index was the top loser among broader indices, down 1.8 per cent to 42,957. The index has corrected 8.3 per cent from its record high level of 46,821 touched on February 7, 2024.

VIP Industries, Timken India, PSP Projects, Alkyl Amines Chemicals, Atul, Barbeque-Nation Hospitality, Campus Activewear, KRBL, Globus Spirits, Automotive Axles, Sterlite Technology and Tarsons Products were among 34 stocks from the smallcap index, which hit their respective 52-week lows.

Market regulator Securities and Exchange Board of India (Sebi) Monday said it is open to revising rules for mutual funds investing in small-cap stocks amid rising concerns about stretched valuations for this segment.

The regulator will review its rule that mandates small- and mid-cap funds to invest at least 65 per cent of their assets in such stocks if fund managers find it is “restraining risk management,” reported Bloomberg, quoting Chairwoman Madhabi Puri Buch.

Individually, Tata Invest was locked in the 5 per cent lower circuit for the second straight day at Rs 8,794.35.

The stock of the Tata Group investment company had hit a record high of Rs 9,744.40 on Thursday, March 7. In the past two months, the stock price of the company more than doubled or zoomed 127 per cent.

Shares of Waaree Renewable Technologies ws also locked in the 5 per cent lower circuit at Rs 7,426. The stock of the power generation company slipped 9.5 per cent from its record high level of Rs 8,205 touched in intra-day trade today.

Thus far in the calendar year 2024, the stock has zoomed 314 per cent, while, in the past one year it skyrocketed 1,241 per cent.

According to V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services, the dominant near-term trend in the market now is of a correction in the broader market, particularly the small caps.

The small cap index is 8 per cent down from the peak and this correction is likely to continue since the valuations are still excessive, he said.

The regulator SEBI has sent a clear message about the frothy valuations in the small cap segment and, therefore, regulatory actions are likely, going forward, analysts note.

"There can be redemptions from small cap funds adding to the downside. Quality large caps will bounce back after a correction, but small caps are unlikely to bounce back in the near-term. PSE stocks that have run up too much too fast also are likely to face selling pressure", said Vijayakumar.