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Indian Small Cap Index,ETFs (SCIF,SCIN) get Massacred by Surfeit of Scandals

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Indian Small Cap and Mid Cap Stocks got massacred today even as the rest of the global markets were up.There was no specific catalysts for the sharp sell off in the small cap space which was down more than 5% with a large number of stocks hitting circuit filters on their way down.FII and brokerage favorite mid cap stocks were the worst off declining by anywhere between 10-20%.Note India has seen a huge wave of scandals hitting the political and business spheres in the past couple of months.While Corruption is nothing new to India with India’s Supreme Court calling “Corruption a Way of Life” ,the rising frequency has unnerved the investors.The Stock Market has also seen a number of scams hitting the news with well regarded stocks  tanking by more than 50% in less than a week.Since its hard to explain all the scams that have been hitting India,I am listing out the blog posts explaining the scams here.

  1. India’s MidCap Stock Scam gets Murkier as High Flying Agri Stocks get Implicated
  2. Has the Tata Group reputation of honesty been tarnished after the Telecom Scam
  3. Indian Stock Market New Day Old Story – Promoter -> Land Scam -> Stock Plunges -> Huge Investor Loss
  4. Karnataka – India’s IT Capital turns into Land of Land Scams
  5. Another Indian Stock Market Scandal Erupts as Realty Firm Ackruti City and Broker Dangi get Banned for Rigging Share Prices

Investing in India is a hazardous activity which institutional investors disregard in their herd behaviour.Small Cap investing is especially treacherous with even the likes of Goldman,GMO,Fidelity falling prey to the manipulation of Indian management and stock borkers.Even the large cap space has started to get affected as it fell sharply in the last part of the day to end down more than 2% .Both the Indian Small Cap ETF SCIF and SCIN are down around 19% in the last month or so and should easily go down by more than 20%.Note investing in Indian small cap space can be rewarding in the long term but ETFs may not be the ideal investment vehicle.In India it pays to invest through an active manager with a good track record as the corporate governance standards are still quite pathetic.


Abhishek Shah

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