The ongoing war between Iran and Israel now seems to be prolonging and its direct impact is on the stock market. Especially a huge decline has been seen in small companies i.e. small cap shares. The situation is such that about 87% of the shares in this segment have fallen and many have registered a decline of more than 40%. Investors’ confidence has wavered and they are now looking for safer options.
There was a sharp rise in small cap stocks in the last few years, but that rise was more based on narrative, earnings were not that strong. Now when global tensions increased, oil prices rose and foreign investors started withdrawing money, these stocks fell rapidly. This is the reason why shares of many companies fell by 25% to 45%.
Which shares fell the most?
There has been a double digit decline in the shares of many small and mid-sized companies. Companies in technology, infrastructure, aviation and chemical sectors were most affected. At the same time, a decline was also seen in some popular names, due to which retail investors suffered huge losses.
Is everything bad?
It is not that the entire market is in the red. Even amidst this decline, some companies have performed well and given returns ranging from 15% to 50%. Especially strength was seen in energy, sugar and some specialty chemical companies. This means that the market is not completely bad, but choosing the right stock has become more important.
Is it a safe haven for investors?
Experts believe that in such an uncertain environment, big shares i.e. large cap companies are safer. They have strong businesses, better management and stable earnings. Therefore, the trend of investors is now moving towards large caps.
How to invest now?
At this time the most important thing is to avoid haste. Investing gradually during market decline is considered a better strategy. Experts advise to keep an eye on sectors like automobile, pharma, capital goods and PSU banks. These sectors have shown strength even in difficult times and can perform well in future also. Small shares are still considered expensive as per their old valuation, hence special caution is necessary while investing in them. However, after the decline, some good opportunities are also being created, but investing in them should be done thoughtfully and with a long-term perspective.
Disclaimer: This article is for information only and should not be considered as investment advice in any way. TV9 Bharatvarsh advises its readers and viewers to consult their financial advisors before taking any money-related decisions.