Travel and chemicals sectors show resilience in smallcaps

Smallcap stocks have faced severe challenges recently, with significant losses across the board. The BSE SmallCap index dropped by 24%, indicating a move into bear territory. About a third of smallcap stocks have declined by 50% or more from their recent highs. Despite these drops, some sectors have shown resilience. Notably, the travel and hospitality, along with the chemicals sector, have fared better. Only 15% of smallcap travel and hospitality stocks and 19% of chemical stocks have seen their values fall by half or more from their peak. Experts suggest that the travel sector has performed well due to higher room rates and occupancy levels. However, they recommend focusing on larger companies with solid financial health. In the chemicals sector, demand has weakened due to ongoing trade disputes, but there are still opportunities for careful investors. On the other hand, sectors like infrastructure, consumer durables, and retail have struggled significantly. More than one-third of smallcap stocks in these areas have dropped sharply. For instance, 43% of infrastructure stocks have fallen by over 50%, largely due to reduced government spending and economic uncertainties. Despite these tough conditions, some analysts think the market may be undervalued. The BSE Smallcap index now trades at a lower price-to-earnings ratio compared to its historical average. They urge caution, advising investors to focus on well-established companies with strong growth potential and to strategically manage their investments. Overall, experts believe that adapting investment strategies to navigate changing market conditions is crucial for success in the current landscape.