The broader market indices, Nifty Smallcap 100 and Nifty Midcap 100, fell up to 3 percent on Friday, extending their losing streak to a seventh consecutive session and underperforming the benchmark Nifty, which declined 1 percent.
Analysts attributed the sharp correction to a combination of factors, including declining investor confidence, elevated valuations and persistent global uncertainties, which continue to deter buyers despite lower price levels.
The Nifty Smallcap 100 fell 3.63 percent to hit a low of 17,611.40. The index has declined around 8 percent over the past seven sessions.
Uttam Kumar Srimal, Deputy Head - Fundamental Research, Axis Direct, noted that the sharp correction in broader markets reflects a combination of elevated crude oil prices, geopolitical uncertainty, persistent foreign investor outflows and concerns over the potential impact of inflation, exposure to MTF book and corporate earnings. After seven consecutive sessions of decline, near-term volatility is likely to remain elevated, particularly in mid- and small-cap stocks, where valuations and earnings expectations leave limited room for disappointment.
"Investors should avoid panic selling but remain selective, focusing on companies with strong balance sheets, sustainable earnings growth, healthy cash flows and reasonable valuations. Any sustained recovery will depend on stabilisation in crude oil prices, improvement in global sentiment and Q2 earnings delivery. A staggered investment approach is preferable to aggressive buying at current levels," he added.