Four out of every five stocks on the Nifty500 index are trading below their 200-day moving averages

The benchmark indices slumped on Tuesday amid worries over the US President Donald Trump’s threat of reciprocal tariffs and unabated foreign fund outflows. The rout in Indian equities saw many stocks breaching their crucial support levels during the trade.

While the Nifty50 index is currently trading 4% lower to its 200-day moving average (DMA), nearly 84% of the broader Nifty500 index has slipped below their respective 200-day moving averages (DMA), show Bloomberg data.

Data further shows that, companies like Sterling and Wilson Renewable, Honasa Consumer, Whirlpool of India, Adani Green Energy and Chennai Petroleum Corporation have seen the widest gap in the Nifty500 index. These stocks are trading anywhere between 40% to 50% away from their respective 200-day moving averages.

Market participants are of the view that companies with high multiples and rich valuations are getting sold off in the correction. “Currently, the market is going through a period of mean reversion,” said Pankaj Murarka, CEO and CIO of Renaissance Investment.
Foreign investors have been aggressively pulling money out of Indian stocks since October last year, largely driven by rising US bond yields and a stronger dollar. They have withdrawn nearly $22 billion from the market on a net basis since the end of September last year, with this year’s sale tally approaching the $10 billion mark.Also Read: As FPI sell-off nears $10 billion, mid and small-cap stocks bleed

However, despite the significant correction in small and midcap space, stocks in these categories are still trading above their historical averages. According to Bloomberg data, the Nifty Midcap index trades at 29 times its one-year forward earnings, whereas the Nifty Smallcap index commands a valuation of 22x. In comparison, the five-year averages for both the indices stood at 26x and18x, respectively.

Between September 2024 and now, the Nifty Midcap100 index has come of 16.4%, while the gauge for small stocks –Nifty Smallcap index—witnessed a bigger fall of 18.2% from its December highs.

On Tuesday, all 15 sectoral indices on the NSE ended the day in the red, with property developers and media companies the worst hit. Among Nifty50 constituents, heavyweights — Reliance Industries and HDFC Bank — contributed the most to the index decline. Barring four stocks, all index constituents lost value in Tuesday’s trade.