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Newer indices like Midcap have lower liquidity, meaning even moderate selling pressure may not be readily absorbed causing abrupt spikes, said market experts.
Comparatively the contract value of Sensex is lower than the Nifty. So, I think that is also for competition, that is also for more retail participation and again this is for, as per the rule of keeping the derivatives contract value to 5 lakh rupees.
With the number of traders and contracts going up, there is a rise in shocking price movements.
In a resounding response to the positive signals from the US Federal Reserve, the stock market closed on a high note on Thursday, marking a significant uptrend after the central bank's indication of concluding its aggressive hiking campaign and projecting a series of rate cuts in the coming year.
CA Rudramurthy, Head of Research at Vachana Investments, advises caution in midcaps and smallcaps as these stocks have started correcting. He points out that yesterday and today there has been underperformance in these sectors. He suggests selling when you can and not when you want, and shifting from momentum to value. He also mentions that the India VIX has been volatile but has not shown any specific moves. He recommends shorting weaker stocks such as Muthoot Finance and M&M Finance, while avoiding selling strong stocks like Escorts, HDFC Bank, and SBI.