Rising interest rates, Securities and Exchange Board of India’s directive on several companies and traders on trading issues and weak global cues are taking their toll on the markets. The Sensex of the Bombay Stock Exchange (BSE) on Wednesday lost 238 points, or 1.2%, to close at 19,696.
The fall was mainly led by the mid-cap and small-cap indices, which fell by 2.2% and 3.2% respectively during the day.
According to experts, with lot of corporate governance issues coming up, investors should be very careful with stock picks.
“There is more concern on mid- and small-cap companies on the front of corporate governance. Also the liquidity available in the mid-cap and the small-cap space have come down,” said Aseem Dhru, CEO, HDFC Securities. “Companies that have seen their prices fall on account of management problems should be avoided.”
When markets correct, mid-caps and small-caps generally bear the brunt as investors move towards bigger and safer stocks with higher liquidity, experts said.
However, if there is no further bad news, markets are likely to bounce back, they said.
Stocks sensitive to interest rate movements have especially come under pressure with the increase in interest rates.
Wednesday’s trading saw consumer durables (-3%), real estate (-2.5%) and banking (-2%) indices leading the fall at the BSE.
While rising rates are expected to hit demand in real estate and consumer durables segments, the banking sector will see its margins shrink because of the same.
Among the Sensex companies, the biggest losers were Reliance Communications and Jaiprakash Associates, which saw their share prices fall by 3.2% and 3.1% respectively.