Small and Mid-Cap Stocks Bear the Brunt in India Market Selloff

The bigger they are, the harder they fall -- except in Asia’s best performing equity market, where Indian small and mid-cap companies’ shares fell twice as much as the benchmark on Monday.

The S&P BSE Smallcap Index dropped as much as 3.5 percent and the mid-cap gauge 2.7 percent, versus the Sensex’s 1.2 percent decline. They had outperformed the benchmark’s 20 percent gain this year by 15 percent and 10 percent respectively through Friday, leading Chokkalingam G, the managing director and founder of Mumbai-based Equinomics Research & Advisory Pvt. to warn of a “bubble building up.”

“At least another 5 trillion rupees of market cap should be chopped off” the small and mid-cap companies, Chokkalingam said by phone. “Industrial growth has nearly stagnated and sectors like information technology and pharmaceuticals, that created jobs and helped build wealth, have been battered.”

India’s Finance Minister Arun Jaitley has said the country needs to find a balance between fiscal prudence and spending -- and there’s no need to panic -- as he tries to dig the economy out of its deepest slump in three years.

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