Eight of 10 BSE 500 stocks retreat from historic 50,000 level of Jan 20

416 stocks shed an average 5.4% and a tenth decline over 10% in just five trading sessions

More than 80 per cent of the stocks from the BSE 500 universe have corrected in the past one week. Since topping the historic 50,000-mark on January 20, the benchmark Sensex has dropped 6 per cent. While the decline in the broad-market indices has been slightly lower, very few stocks have been spared in the latest market meltdown. Four hundred and sixteen stocks in the BSE 500 index have declined an average 5.4 per cent and a tenth of them have declined over 10 per cent in just five trading sessions.

Market experts believe the market had gotten overheated and were ripe for correction. Between November 1 and January 20, the Sensex, BSE 500 and Smallcap index had risen 26 per cent each, while the Midcap index had jumped nearly 30 per cent.

"The market has run up too fast too early due to liquidity. Now the fund flows have come down, which has led to the retreat," said A K Prabhakar, head of research, IDBI Capital.

 

“This correction has given a good entry to long term investors. One should buy quality stocks and those with growth potential. Stocks without strong fundamentals need to be avoided. There are value pockets, and one need not unnecessarily worry about the market correction.”

The 20 stocks from the BSE 500 universe that have declined the most since January 20, had gained an average 60 per cent in the preceding three months. Stocks that had posted relatively modest gains since November and those with high growth potential, have managed to hold their ground in the recent correction.

"Markets have sharply moved up in the last few months and are trading at a premium valuation. And a lot of positive events were already priced. The risk-reward became unfavorable and that's why we are seeing some profit booking happening in the market. The direction of the broader market in the near term will depend on global cues and the budget. Anyone looking to invest in the broader market should have a two-three year horizon. The outlook over three years for the economy and earnings growth looks good. If investors are taking short term positions then they should have strict stop-loss and, be disciplined," said Siddhartha Khemka, head of research(Retail), Motilal Oswal Financial Services.