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Sensex sees a deep dive; this is how much wealth eroded in September

Smallcaps and Midcaps remained the worst hit in the last few days.

twitter-logo Niti Kiran   New Delhi     Last Updated: September 26, 2018  | 20:59 IST
Sensex sees a deep dive; this is how much wealth eroded in September

After touching an all-time high of 38,896.6 on August 28, 2018, the Sensex slipped in red in 13 out of the 18 trading sessions till date. It slumped the most -- around 977 points in two consecutive trading sessions -- between September 07 and 11 September, 2018. The bullish rally seen in the equity markets in 2016 and 2017 made a weak entry in 2018. After a brief rally in the beginning of the year, markets turned choppy starting May. The Sensex has declined in 10 sessions in the month of August and September (till date). On Tuesday, the index settled at 36,652.06, up 347 points. The 30-share index is still down nearly 6 per cent since its record high hit on August 28, 2018.

So, how does it impact an investor's wealth? Wealth erosion is certain; there is no doubt about it. To get a broader sense of the market, we have assumed an investment of Rs 1 lakh in the Sensex, the Midcap index and the Smallcap index at the beginning of this month. An investment of Rs 1 lakh yielded a negative return of 4.3 per cent in Sensex, 9.1 per cent in Midcap and 11.3 per cent in Smallcap till September 25, 2018.

Figures in Rs; based on assumption of an investment of Rs 1 lakh at the beginning of the month

Smallcaps and Midcaps remained the worst hit in the last few days. To put things in perspective, one needs to retrospect the move that we have seen since January 2018.  "Smallcaps and Midcaps were hot on the streets as everyone was jumping into them and then a correction was seen which was very deep. Post that, the rally we have seen in broader indices was supported broadly by the largecaps as compared to a bullish rally we saw in 2016-2017.  So, when the market got weaker, smallcaps and midcaps were first to get hammered simply because they were relatively weaker in the present structure as compared to the large-cap stocks or sector," explains Mustafa Nadeem, CEO, Epic Research.

The fall we have seen now could be followed by a correction that can last till October. "All this fiasco will take out some weak money from the market and of course when the time is right and valuations are cheap in terms of price, we may see value-buying coming in. But it is too soon to say we are near a bottom. That phase may take a month or two going forward," adds Nadeem.

Going forward, one should not get aggressive to dive into the market as this is a shake-off that hurt not just the retail investors but also institutional players.

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