The Hindu Business Line : BSE Mid-cap, Small-cap stocks end in red

Mumbai, May 12 The BSE Mid-cap and small-cap indices registered negative movement on Monday even thoughthe large-cap stocks, which opened weak, moved up towards the close of trading as European markets opened strong.

The Index of Industrial Production (IIP) data released on Monday showed just 3 per cent year-on-year growth in March compared with 8.6 per cent in February. This weakened market sentiment in the initial hours of trade when the BSE Sensex dropped by around 200 points. But large-cap stocks recovered as the European markets opened stronger. Later, short covering and a stronger opening of the European markets made a positive impact on the large-cap stocks; however, the mid-cap and small-cap indices could not recover lost ground, an analyst said.

“Inflation is a concern; we are in a situation right now where a large number of companies are going to show comparatively lower earnings growth as compared to a smaller number of companies whose growth will be better than in the past,” said Mr Raamdeo Agrawal, Co-founder and Managing Director, Motilal Oswal Financial Services.

The BSE Mid-cap index which consists of 102 scrips, fell 0.67 per cent while the small-cap index which consists of 99 scrips, declined by 1.20 per cent.

On the other hand, the BSE Sensex closed up by 0.74 per cent, snapping a five-day losing streak.

The BSE-100, BSE-200 and BSE-500 indices too made small gains, of between 0.31 per cent and 0.51 per cent.

Negative sentiments

The fall in the Mid-cap and small-cap indices, however, was also in line with the broader market sentiment which was negative.

In the overall market 64.69 per cent or 1,777 scrips declined, against 33.49 per cent or 920 scrips advancing amongst 2747 scrips totally traded.

During the past week, the advance-decline ratio remained positive, had turned negative only on Friday, although the benchmark indices had shown sustained weakness.

The number of scrips that hit the upper circuit too was fewer at 136 as compared with 184 scrips hitting the lower circuit. The trend had reversed in the past two trading sessions, from the preceding sessions last week indicating an undercurrent of weakness in the market.

“IIP numbers are not very good and the Government’s single point agenda to control inflation has been negative,” Mr Sujan Hazra, Chief Economist, Anand Rathi Securities, said, adding that “growth prospects were also now looking weaker.”

“The sentiment was weak also on account of global factors. Worldwide, there is also risk aversion. And the financial sector in the industrialised countries is not doing well,” said Mr Hazra.

The Chinese equities market like the Indian market made a modest gain of 0.37 per cent on Monday; the Shanghai Composite Index was up 13.49 per cent.

In China too inflation stood at 8.5 per cent as per Monday figures for April — a 12-year high — and has been a concern along with crude oil prices which are hovering around $125 a barrel.

Financial year 2008 results indicate a slowdown in growth for India, said a report from broking firm Emkay Shares & Stockbrokers Ltd. “India Inc has seen a slowdown in revenues over the past few quarters. The slowdown is visible especially in automobiles.”

The IIP figures released on Monday were weaker than expected “following the moderation in activity which has set in”, said a Goldman Sachs’ Asia Economics Research Group report: “Key coincident indicators such as the PMI index, cellular subscriptions and non-food credit are pointing towards a continued moderation rather than a sharp slowdown in activity.”

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