Why are mid, small-caps bleeding? Indices crash up to 4% - Swiggy, Meesho, Vedanta Aluminium, MCX lose big

Top drags on the smallcap index Delhivery, HFCL, Ather Energy, RBL Bank, IIFL Finance, and Apar Industries were among the top drags on the BSE 250 Smallcap Index. Why are mid, small-caps bleeding? While the market is witnessing an all-round selloff, the mid and small-cap segments are bleeding more due to their higher valuation amid persistent geopolitical concerns, elevated oil prices, and rising bond yields.

"Mid-cap and small-cap stocks are bleeding largely because of elevated valuations. Valuations in these segments had become unjustifiably high, driven primarily by liquidity. Look at the mutual fund inflows into mid-cap and small-cap funds in September," said V K Vijayakumar, Chief Investment Strategist at Geojit Investments. "New investors are not particularly concerned about valuations. They believe mid-cap and small-cap stocks will outperform over the long term and, therefore, are willing to pay any price.

However, that is not what market experience suggests," said Vijayakumar. What should investors do? As the market is witnessing a widespread selloff, the question arises: What should investors do? Experts say the answer to this question rests on one's risk appetite. "Whether you invest in large-cap, mid-cap, or small-cap stocks depends largely on your risk appetite. Earnings growth across all three segments has been reasonably satisfactory.

It is external factors and technical factors that are driving the current market correction," said Pankaj Pandey, the head of research at ICICI Securities. Brent crude traded near $114 per barrel on Friday, keeping market sentiment fragile. Market experts caution that, since oil prices have been rising for most of the year, the market outlook has become hazy. There could be brief relief rallies, but a sustained rally will occur only if oil prices fall, the rupee strengthens, and foreign portfolio investors return to the Indian market.