The Hindu Business Line : Downtrend pinches mid, small-cap indices more

MID- and small-cap stocks, which have been the favourites of the Indian stock market in recent times, have taken a beating this month recording price falls sharper than those in the large cap stocks.

A comparison of the various stock indices shows that indicesof mid- and small-cap stocks have fallen by more than 8 per cent from their all-time high levels touched earlier this month.

On the other hand, benchmark indices such as the BSE Sensex and the NSE S&P CNX Nifty have fallen by less than 8 per cent from their peak high levels.

The highest fall is seen in the NSE Nifty Junior, which is down by 8.81 per cent, followed by the BSE-200 by 8.32 per cent and the S&P CNX-500 index by 8.21 per cent from their peak levels. The CNX Mid-Cap 200 index has fallen by 8.06 per cent and the BSE-100 by 8.03 per cent.

Compared to this, the BSE Sensex is down by 7.36 per cent and S&P CNX Nifty by 7.69 per cent.

The fall in mid- and small-cap stock has come just after several FIIs and mutual funds have made investments in several stocks in this category. Several mutual funds have also come out with IPOs with the objective of investment in small- or mid-cap stocks.

Brokers and analysts attribute for the higher fall in these stocks to sharp rise in their prices. "Since most of the mid-cap stock prices had run-up very fast the fall was inevitable," said a broker.

"Most of the mid-cap and small-cap stocks are closely held compared to large-cap stocks, which are widely held. Even a small selling in mid-cap and small-cap stocks pulls down their prices sharply," said Mr Arun Kejriwal, Investment Strategist, Angel Broking.

A top official of a leading domestic broking firm said several market players had built up position in these stocks on expectation that FIIs and mutual funds would buy these shares at higher level but this has not happened. Moreover, several players who had bought shares on margin money are now selling as brokers have started asking for the money lent to them.

However, a mutual fund manager said the fall in mid-cap stocks is a short-term phenomenon due to the end of financial year.

"Several funds are sitting on cash and waiting for good opportunity to enter the mid-cap stocks," he said.

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