SMIDs unsettling calm

New Delhi: The number of days, the Small & Midcap indices have risen by one per cent or more neared previous best years in 2023. Such broad, ‘all boats sailing’ uptrend years are rare. In the past, such years have been followed by more than average drawdowns in the following year, DSP Mutual Fund said in a report.

On average, calendar year drawdowns for large-cap, mid-cap and small-cap are 19 per cent, 23 per cent and 26 per cent, respectively. But the year following a bullish ‘unsettling calm’ year, the average drawdowns for top 5 of such years are 27 per cent, 32 per cent and 37 per cent for largecap, midcap and smallcap indices respectively. This indicates that these calm years are followed by heightened volatility and drawdowns.

The report expects markets to become volatile in 2024. BSE Sensex Index has now gone for almost 8 years without a bear market, the report said. One of the ways to define a bear markets is a decline of more than 20 per cent and a time period of more than one year to regain previous highs.