Midcap index down nearly 2% from highs as GST cheer fades, three-day rally snaps: Top losers

Shares of several broader market names from the small and midcap space fell on September 4 despite an initial cheer following the GST rate cuts, with both Nifty Midcap and Nifty Smallcap indices down nearly 2 percent in the session, underperforming the benchmark Nifty 50 index.

Ola Electric shares were the top loser on the midcap index, dropping nearly 8 percent as investors likely booked profits at elevated levels. This comes after the stock rallied around 77 percent in just half a month.

Max Financial Services shares fell nearly 4 percent, and Paytm shares fell 3.5 percent amid the buzz of rival PhonePe's initial public offering (IPO). Exide Industries and Cochin Shipyard shares plunged more than 3 percent each.

AU Small Finance Bank and Sona BLW Precision Forgings shares fell around 3 percent, while BHEL, UPL, Rail Vikas Nigam Limited (RVNL), Kalyan Jewellers and Coforge shares fell around 2 percent each. Other notable midcap losers include Federal Bank, Bharat Dynamics (BDL), Oil India, Premier Energies, Ashok Leyland, NHPC, Voltas, Solar Industries and more.

On the smallcap index, defence stocks like Data Patterns, Garden Reach Shipbuilders & Engineers (GRSE) and BEML were the top losers, falling more than 3 percent each, as the pack saw profit booking after a four-day gaining streak.

Karur Vysya Bank and IRCON shares fell nearly 3 percent, while NCC, HFCL, ITI, Chambal Fertilisers, Anant Raj, Poonawalla Fincorp, Radico Khaitan, Hindustan Copper, FirstCry-parent Brainbees Solutions, RITES, Sagility India, Welspun Living and others fell nearly 2 percent each.

"Small- and mid-cap stocks corrected today even as GST reforms created a positive backdrop. The key reason was the weekly Sensex expiry, which naturally added volatility and led to some short-term unwinding. In addition, traders booked profits after the strong rally these segments have enjoyed in recent weeks, following the classic ‘sell on good news’ pattern. Structurally, the GST cuts are a strong tailwind for consumption, especially in rural and semi-urban categories, and once the expiry-led volatility fades, the broader market should benefit. This looks more like a healthy pause than a trend reversal, with fundamentals still pointing towards strength in small- and mid-caps," said Harshal Dasani, Business Head, INVasset PMS.

"Even as there are robust mutual fund inflows, small- and mid-cap spaces are disappointing—Nifty Midcap 150 has yielded only 0.7% return this year, while Nifty Smallcap 250 has fallen 4.4%, even as the overall Nifty 50 is up by 4.5%. At the same time, Q1 earnings highlight the agony: small-cap margins are at a nine-quarter low of 7.5%, and mid-caps trail further behind with only 1% growth, compared to 9.5% for large caps. The divergence points to lingering valuation issues and institutions' rotation into defensive large-cap sectors," said Siddharth Maurya, Founder & Managing Director, Vibhavangal Anukulakara Pvt. Ltd.

"The downturn seen in small caps and mid caps is a continuation of the correction seen over the last few months, post the euphoric gains seen last year. While the GST gain will help the mid and small caps, the underlying issue in terms of GST filing complications and working capital impact in terms of ITC refunds impacts MSMEs more. These concerns remain. In addition, the global uncertainty and tariffs, which may lead to lower exports especially for companies targeting America, are also impacting sentiment. We expect broader markets to stabilise and might wait for a trigger like an India-US deal to get them moving significantly upwards," said Shravan Shetty, Managing Director, Primus Partners.

Also Read: Our LIVE blog on stock market updatesDisclaimer: The views and investment tips expressed by experts on Moneycontrol are their own and not those of the website or its management. Moneycontrol advises users to check with certified experts before taking any investment decisions.