Losers outpace gainers for the first time in 11 months, shows data

Losers outpaced gainers for the first time in 11 months in February, a sign that cracks could be building in the small and midcap space, amid concerns around expensive valuations. About 2,110 stocks rose, while 2,200 fell last month on the BSE, translating into an advance-decline ratio (ADR) of 0.96 — worst since March 2023 when ADR was 0.9. Between March 2023 and January 2024, the ADR was consistently more than 1.

During this period, the Nifty 50 index has rallied nearly 30 per cent, while the Nifty Midcap 100 and Nifty Smallcap 100 indices have rallied nearly 60 per cent and 70 per cent, respectively. In February, the Nifty Smallcap 100 and the Nifty Midcap 100 posted their first monthly losses after three months, even as the benchmark Sensex and the Nifty 50 rose about a per cent each. This week, the Securities and Exchange Board of India (Sebi) expressed concerns over growing “froth” in the smallcap space. 
 

Sebi, through mutual fund (MF) industry body Amfi wrote to MFs, asking them to put in place an investor protection framework for those investing in smallcap and midcap funds. It has recommended measures like putting restrictions on inflows, portfolio rebalancing, and creating a framework to protect investors from the first-mover advantage of redeeming investors. 
 

The Nifty Smallcap 100’s 12-month forward price-to-earnings ratio has risen to 22 versus its 10-year average is 16.5, according to Bloomberg data.