Indian markets, which had seen a period of largecap underperformance in the first half of financial year 2026-27 (H1FY27), continued to witness a broad-based correction in September. The Nifty 50 stocks were dragged down by foreign selling, and at the same time, smallcaps and microcaps were in bull markets powered by domestic funds.
During the period, foreign institutional investors (FIIs) pulled out ₹2.32 trillion, while domestic institutional investors bought shares worth ₹3.89 trillion. Experts are now worried that the midcap and smallcap space might have entered bubble territory and investors need to be careful.
On Wednesday, the Nifty ended at 22,620.45, down 0.4 per cent, while the Sensex fell 0.1 per cent to 72,480.29. The Nifty and the Sensex had gained only 1.3 per cent and 0.7 per cent, respectively, during H1FY27, even as midcap and smallcap indices surged.
The Nifty Midcap 150 index is up 12.5 per cent and the Nifty Smallcap 250 has gained 24.6 per cent between April and September.
September, however, has seen all three segments come under pressure. The Nifty and the Sensex are down nearly 6 per cent each, while the Nifty Midcap 150 has declined 7.1 per cent and the Nifty Smallcap 250 has fallen 3.1 per cent. This marks the first negative monthly close for the midcap and smallcap indices in FY27, while the fall in the Nifty and the Sensex is their largest since March this year, when the West Asia conflict broke out. Global events have turned hostile for foreign investors, with US bond yields touching a 19-year high of 5.28 per cent.
Brent crude oil prices have moved from $90 a barrel at the beginning of September to nearly $109 a barrel during the month. On Wednesday evening, Brent crude was trading at $97.80.
“September has been a particularly brutal month, driven by the lack of de-escalation in the West Asian conflict, which has pushed oil prices higher and raised concerns around India’s import bill and inflation,” said Sonam Udasi, senior fund manager, Tata Asset Management. New listings from mainboard initial public offerings (IPOs) added ₹10 trillion to the BSE’s market capitalisation (mcap), which stood at ₹471.86 trillion at Wednesday’s close. The exchange added a total of ₹59.45 trillion in mcap in H1FY27, despite ₹18.4 trillion being wiped out in September.
