Market Flat but Portfolio Bleeding: What’s Happening?

  • Stock Market Analysis

If you look at the frontline Nifty 50 index, it has been trading flat for the last many sessions. The range of 17,200 - 17,225 on the upside and 16,850 - 16,825 on the downside is keeping the index from picking up a direction. However, the stability of the index is giving an illusion of suppressing fears in the market, which clearly, is not the case.

If you look at your portfolio, it is still bleeding day after day. In fact, the Nifty 50 index is absolutely flat for the last one year, delivering a negative 1.37% return but individual portfolios are significantly down in the same period. This is due to the ongoing divergence between large caps and small caps.

Investors seem to be moving toward a few large caps that are essentially holding the index. This generally happens during times of uncertainty when relatively safer stocks attract an increasingly high demand over smaller and more volatile peers. While the Nifty 50 index is down around 10.1% from the all-time high of 18,887.6, marked on 1 December 2022, the Nifty Smallcap 50 index is down 31.9% from the all-time high of 5,889.45, marked on 19 October 2021. Another interesting thing to note is when the large-cap index hit a new high in December last year, the small-cap index was still 23% off its previous high.

In a nutshell, Nifty’s 10.1% decline from ATH vs Nifty Smallcap 50’s fall of 31.9% from the ATH is the primary reason for your red portfolio. These are index-level drawdowns. As it is hard to beat index returns even for fund managers, it’s not surprising that retail portfolios would be having higher drawdowns. So technically, these bleeding portfolios have more to do with the current divergence between big & stable businesses and small & volatile ones. Small-caps being more volatile have higher drawdowns than their larger peers, but the relentless sell-off in these counters is clearly visible. Midcaps are also taking a decent beating but not as severe as small caps.

So what could happen now? Generally, when these market-wide divergences form, two things are likely to happen in the near future, either small caps will rally to cope with the broader trend or large caps will take a hit which minimizes the divergence. If you want to capitalize on these dips, you can explore good small-cap mutual funds for the long term.

Read More: An Option Selling Strategy for Nifty 6 April Expiry with 7% ROI!

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  • Manoj kumar @Manoj kumar
    Thanks Ayush. Weekly SIP is in progress for good small caps.
    Like 1
    • Aayush Khanna/Investing.com @Aayush Khanna/Investing.com
      That's great, Manoj.
      Like 1
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  • Rahul Khismatrao @Rahul Khismatrao
    Great ! Logical analysis. Thank you for putting it with probabilities. It makes so much sense.
    Like 2
  • NIRAV JARIWALA @NIRAV JARIWALA
    nifty expiry 16825 and bank nifty expiry 38850  25 /50 point up and down
    Like 1
  • kadar supermarket @kadar supermarket
    yea yea there he goes again ....what he is basically saying that market will either go up or go down....no need to write big essay on that to complicate things....this even donkey knows market will either go up or down from here ...it will be great if you can tell one way but not either way .... such point by point logically true fact my bam
    Like 4
  • Anil Mohapatra @Anil Mohapatra
    logical explanation.. Thanks Aayush
    Like 3
    • Aayush Khanna/Investing.com @Aayush Khanna/Investing.com
      You're welcome, Anil.
      Like 0
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  • NIRAV JARIWALA @NIRAV JARIWALA
    sell bank nifty 39550 target 39235 intraday
    Like 1
  • Palvinder Singh @Palvinder Singh
    Nice ! Ponit by point logicaly and true fact
    Like 2
  • Satvik Kini @Satvik Kini
    very nice...Aayush...u always try to come up.with logical, value.adding articles....good job....keep.up.thr good work...
    Like 1
  • namami ghosh @namami ghosh
    absolutely fantastic analysis!
    Like 1
  • zaid shaikh @zaid shaikh
    Very apt and logical analysis. loved it.!
    Like 2
  • Ritika Su @Ritika Su
    invest in MAFANG ETF.its good
    Like 3
  • Sunil Dani @Sunil Dani
    If possible can you guide about the preindication when this situation starts and ends? thanks
    Like 0
  • NIRAV JARIWALA @NIRAV JARIWALA
    sell hindalco 396 target 391 intraday
    Like 0
  • NIRAV JARIWALA @NIRAV JARIWALA
    sell nifty "below"  16950 target 16870 intraday
    Like 0
  • Sonu Tyagi @Sonu Tyagi
    Kindly provide some name of good smallcap mutual funds as well
    Like 0

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