One In Four Nifty 500 Companies Are Trading In A Bearish Zone

As the Indian market's benchmark Nifty 50 corrected 4% from its lifetime high levels, nearly 140 companies of the Nifty 500 were trading in a bearish zone.

A bearish zone is defined by a decline of 20% or more from the highest price. Among the top 500 companies by market capitalisation, over one in four companies qualified per this definition, as on Oct. 4.

"[Even as] market touched new highs, there were only 95 stocks out of Nifty 500 which were within 5% of their all-time highs," said Anand Shah, head PMS and AIF investments at ICICI Prudential AMC. Markets are already correcting internally, he told NDTV Profit.

"Markets used to correct almost 10% once, twice or maybe thrice a year," he said. "We have not seen deep corrections in the market since 2020. We haven't seen a 20% correction, and we have still seen only one 10% correction."

An additional 180 companies, making up for a third of the Nifty 500 constituents, are trading between 10-20% below their lifetime high levels.

"The recent rally is purely driven by large caps," according to Sunny Agarwal, head of fundamental equity research at SBI Securities. "Most small and midcaps have already started to see profit booking, and the shift has begun to largecap companies."

Agarwal differs in opinion from calling this to be a bearish phase for the stocks trading at a 20% or larger discount to their lifetime high levels.

"A 20-30% correction is normal for stocks in the small and midcap categories, even in the middle of a bull run," he said. "I'd rather use the 200-day moving average to ascertain if they are in a declining trend," Agarwal said.

Per this criteria, 114 stocks of Nifty 500 constituents are currently trading below their average price over the trailing 200-day period.

While this is less than the 140 trading at least 20% lower than their life highs, it still makes up for over one in five stocks in the index.