Shares of smallcap and midcap companies dropped up to 5% on Monday as broader markets tumbled, underperforming benchmark indices.

The Nifty Midcap 100 index lost around 400 points to more than 0.6% to 63,684, as seen at around 12.20 pm. IT major Persistent Systems shares were the top loser on the index, falling over 4% as Federal Reserve chief Kevin Warsh’s hawkish comments increased expectations for rate hikes by the American central bank, dampening sentiment for the IT stocks.

National Aluminium Company (NALCO) shares fell around 4%, as metal stocks led losses on the market on the back of profit booking and falling metal prices. Other midcap losers included KPIT Tech, BSE, Radico Khaitan, Tata Elxsi, Bharat Dynamics, 360 One WAM, HUDCO and Hindustan Petroleum Corporation (HPCL), each of which fell over 2% each.

Nifty Smallcap 100 index meanwhile lost 112 points or 0.6% to trade below 20,000. Kaynes Tech shares were the top losers on the index, crashing over 5%. Wockhardt and Jyoti CNC shares followed, dropping around 4% each.

Other notable smallcap losers included Poonawalla Fincorp, Netweb Tech, GE Shipping, Inox Wind, Angel One, Piramal Pharma, IIFL Finance, Bandhan Bank, GRSE, Anant Raj, Manappuram Finance, Tata Tech, Reliance Power and others.

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What lies ahead?

This week’s trading begins with the market facing a few headwinds, said VK Vijayakumar, Chief Investment Strategist, Geojit Investments He noted that from the global equity market perspective, the sentiments have turned slightly negative following the Fed chief Kevin Warsh’s statement that if inflation persists at rates higher than the Fed’s long-term target, “we have work to do”. The market has taken this as an indication of a rate hike in the FOMC meeting scheduled for September 15-16. The consequent rise in bond yields is negative for equity markets.

Another headwind is the renewed escalation of tensions between the US and Iran, pushing the Brent crude above $90, he said, adding that lots of action are likely in the broader market which attracted big buying in recent weeks. A significant recent trend in the market is that the market is giving more preference to growth than value, according to the analyst.

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