Small, midcap stocks lose $47 billion this week amid moves to skim 'froth'

Still, these stocks logged their worst week in 15 months, as mutual funds started disclosing results of stress tests ordered by the Securities and Exchange Board of India to assess their resilience to sudden redemption pressures.

The data showed a disparity in the duration that the houses would take to liquidate their portfolios.

In a blistering rally that began nearly a year ago, the Nifty small-cap 100 index nearly doubled in value and the mid-cap index rose about 60%, hitting record highs this February and sharply outperforming the blue-chip indexes.

Despite the recent correction, these stocks are at lofty valuations, analysts at Kotak Institutional Securities said, adding that "many low-quality stocks may still have a long way to fall."



The Association for Mutual Funds in India (AMFI) has asked members to moderate inflows into small- and mid-cap funds and protect investors from large outflows, after strong inflows raised worries of a potential crash.

However, AMFI data for February last week showed that small-caps continued to attract the highest inflows after equity oriented schemes, despite valuations concerns.

Smallcap mutual funds have received higher inflows than mid- and large-cap funds for 17 months in a row.

"Even without stress tests, one thing is clear: the broader market valuations are unsustainable and some pockets are frothy," said VK Vijayakumar, chief investment strategist at .