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The Nifty and Sensex, India's key benchmark indices, experienced a notable decline exceeding 1.5%, reaching levels last seen on March 01. This decrease occurred despite a decrease in domestic inflation rates, which dropped to 5.09% year-on-year in February from 5.10% in January.
 
The downturn in the Indian stock market is primarily linked to a significant fall in the midcap and small-cap indices, plummeting by 4 to 5% during today's trading session.

This drop is a response to concerns raised by the market regulator regarding the overvaluation of midcap and small-cap stocks, leading to froth-building in these segments. The regulator, expressed apprehensions about potential frothiness in these segments on Monday, highlighting their exceptional performance and currently elevated valuations. The remarks have sparked speculation about potential restrictions on fund allocation, causing disruptions in market sentiment. Consequently, certain mutual fund AMCs have initiated measures to restrict fund allocation or lump sum investments in midcap and small-cap segments in response to these developments.

 

 

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