Rajandran R Founder of Marketcalls and Co-Founder Algomojo. Full-Time Derivative Trader. Expert in Designing Trading Systems (Amibroker, Ninjatrader, Metatrader, Python, Pinescript). Trading the markets since 2006. Mentoring Traders on Trading System Designing, Market Profile, Orderflow and Trade Automation.

The SmallCap Meltdown

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Nifty SmallCap Daily Charts

Investor faith in small caps has been shaken as the SmallCap Indices are in absolute panic last Friday. Index closes 6.06% down on last Friday and down by 10.63% on the Union Budget 2018 week. The fear in Smallcap starts during the mid of Jan 2018 and the warnings by one of India’s richest bankers, Uday Kotak, of building of a stock market bubble.

“The amount of money that’s going into small- and mid-cap stocks is something on which we have to ask tough questions. You’re pushing all this (money) into a narrow funnel which inevitably runs the risk of a bubble,” said Uday Kotak in a Interview on January 16th.

Also the PE ratios peaked up in Smallcap and Midcap indices historically during the month Jan 2018. BSE Small-cap index stood at 129 while that for BSE Mid-cap index stood at 50. The PE for both the indices is higher than in the tech bubble of year 2000 and financial crisis of 2008.

BSE SmallCap Market Breadth and PE data as on 2nd FEB 2018

(source : BSEIndia.com)

Its been widely believed that Investors seemed to be disappointed with the fiscal deficit numbers and introduction of LTCG tax which eventually leads to broader sell off in smallcap and midcap stocks post the budget event.

Rajandran R Founder of Marketcalls and Co-Founder Algomojo. Full-Time Derivative Trader. Expert in Designing Trading Systems (Amibroker, Ninjatrader, Metatrader, Python, Pinescript). Trading the markets since 2006. Mentoring Traders on Trading System Designing, Market Profile, Orderflow and Trade Automation.

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