Mutual funds, banks and insurers go shopping after worst Wednesday for bourses

Financial institutions made record single-day purchases of local shares, cashing in on the sharp selloff in small- and medium-sized companies.

Investors including mutual funds, banks and insurers bought a net $1.1 billion of shares, according to Bloomberg data. Foreigners sold a net of $555 million of stocks, provisional data show.

Shares rebounded Thursday, with a gauge of smaller companies jumping as much as 2.9% in the best performance since December 2022. 

The index is still hovering in correction territory, after retreating about 10% from its February peak.

The selloff has erased more than $80 billion off the small-cap gauge’s value in two weeks through Wednesday amid concerns raised by the securities regulator about stretched valuations in the segment. The measure had rallied about 75% from March 2023 through February, on the back of strong economic growth and corporate earnings.

Foreign brokerage Jefferies said it is not a 'meltdown' but just another healthy correction, adding that this is not a repeat of the 2018 scenario, where the smallcap index had corrected over 45 per cent. While Jefferies did not rule out more correction in the broader market given the surge in small and midcap volumes and strong inflows to mutual fund schemes, it highlighted instances where a sharp surge in the broader markets over a period was followed by a correction, CNBC TV18 reported.