The last week saw a distinct change in the market mood. While the smallcap and SME space decisively cracked, the market seemed more willing to sell. This was a marked shift from its earlier mood when selling was out of question. From only thinking of what to buy next, the market shifted to thinking how to raise some liquidity and what to sell in order to achieve that.

This shift in mindset was partly due to the need to pay advance taxes and also due to the perceived problems arising from the AMFI advised stress test in smallcap funds. But, it may be too early to judge the trend and the coming week will see advance tax numbers and liquidity driving the trend.

As election fever grips the markets, investors may become a bit more circumspect on equities and look to get clearer signals on the political way forward. The sustained rally we saw from April 2023 has probably ended and we need to see how the correction in equity valuations takes shape. Investors must use the correction for selective buying, improving position sizing, and scaling up of portfolios.

Clearly, a very stock specific market is ahead of us and we must use the swings in market sentiment to our favour.

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