Midcap Crash: Why did midcap shares crash in 30 minutes, what will happen to your stock? Know in a special report:

News Topical, Digital Desk : Midcap and smallcap stocks witnessed a sharp decline in the Indian stock market on Wednesday. This is the third consecutive day when the broader market has shown more weakness than the benchmark index. Due to profit booking in the market, high valuations and rising crude oil prices, investors distanced themselves from small and midcap stocks, causing the indexes related to them to collapse. Nifty Midcap 100: Declined 1.7%, down over 1,000 points to end at 57,107. Nifty Smallcap 100: Declined 2%, down over 400 points to end at 17,982 Sensex: Declined marginally by 40 points to end at 81,407 Nifty 50: Declined 24 points to end at 24,788

Reason	Impact
profit booking	sharp decline
High valuation	Investors' concerns
Global Tension	Risk aversion
Portfolio Makeover	FII Selling
Sector-specific declines	Pressure on the index

1. Profit Booking
In the last few months, there was a tremendous rise in mid-cap stocks. Now that the prices have reached a high level, investors are taking profits, that is, selling shares. Due to this, the share prices are falling.

2. Stretched Valuation
The shares of many mid-cap companies had become very expensive compared to their actual earnings. Experts felt that these shares were "overvalued", that is, more expensive, hence the fall.

3. Geopolitical tensions and crude oil prices Due to crises like Israel-Iran, the prices of crude oil have risen. This is likely to increase inflation, which creates fear in the entire market - especially in mid-small caps, which are more sensitive.

4. FII and DII portfolio rebalancing Foreign and domestic institutional investors (FII/DII) are balancing their portfolios. They are withdrawing money from midcaps and investing in large stocks. This is creating pressure on midcap stocks.

5. Sectoral weakness (fall in specific sectors) There is more selling in midcap stocks of PSU banks, NBFCs, real estate and energy sectors. Stocks like Bank of India, RVNL, IREDA, Union Bank fell by 3-4%. The midcap index is also coming down due to sector-based fear.

Does this mean midcaps are now in danger? – According to a report by Bajaj Finserv AMC, the fundamentals of midcap companies i.e. profit, ROCE, growth – are still strong. This fall is a correction, which long-term investors can see as an opportunity. Ajit Mishra, SVP (Research), Religare Broking says that inflation concerns have increased due to rising oil prices and global tensions. Along with this, after the recent rally in mid and small caps, the valuations had stretched a lot. In such a situation, this decline is the result of profit booking and re-balancing. "