The Nifty Midcap 100 tumbled as much as 2.9% Friday, extending its drop from recent high to more than 10% β the parameter for a so-called technical correction. Heavy selling by foreign portfolio managers this month fueled the downturn in the index, which had rallied about 30% through September 23.
The rapid change in fortunes for Indian stocks came as a rally in Chinese shares gathered steam, following a central bank stimulus blitz in late September that sparked a frenzy of buying. Slowing earnings growth in India also weighed on sentiment.
While foreign investors have soured on local shares, domestic institutions have poured in billions to absorb their selling.
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Global funds have sold stocks worth nearly $9 billion in October so far, reducing the annual inflows to $2 billion. Buying from Indian funds and insurance companies has topped a record $50 billion, helping the mid-cap stocks still show gains of more than 19% for the year.
βThere was, and is, very little margin of safety in the valuations,β said Sanjeev Prasad, co-head of institutional equities at Kotak Securities Ltd. in a note this week. βThere is no change in our cautious view despite the recent correction in the market,β he said.
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