The Hindu Business Line : Mid-cap stocks take a beating on profit taking

AFTER excellent returns in 2003, mid-cap and small stocks have taken a sharp dip in their prices from their yearly high mainly due to profit booking by institutional investors this month.

A comparison of the various stock indices of BSE and NSE shows that broader indices fell much more than frontline indices from their new high levels touched early this month.

Most of the stock indices touched their all-time high levels this month.

The BSE Sensex has fallen by 9.72 per cent from its all-time high level of 6249.6 touched in January to Friday's closing value of 5695.67. Similarly, the S&P CNX Nifty index declined 10.52 per cent from high of 2000.30 to Friday's closing value of 1809.75. However, the fall in other indices such as the BSE 100, the BSE 500 and the CNX Midcap 200 is much higher.

For instance, the BSE 100 has declined by 14.49 per cent, the BSE 200 by 14.36 per cent, the CNX Midcap 200 index by 14 per cent and the CNX 500 by 12.28 per cent from their 52-week high level touched this month.

Brokers and analysts say one major factor for the comparatively higher fall in broader indices is profit-taking in most of the mid-cap stocks. "There has been profit booking by both retail and institutional investors in mid-cap stocks and this resulted in sharp fall in their stock prices," said Mr Nikhil Thacker, Assistant Vice-President (Research), Asit C Mehta Investment Intermediaries.

Other analysts said sharp fall in several mid-cap stocks is mainly due to the over leveraging (margin trading) by several traders. These traders had bought shares on borrowed funds and during the fall in the overall market they sold several mid-cap stocks to pay for additional margins for the loss in value of the shares bought.

However, Mr Arun Kejriwal of KRIS Research said, "The fall in stock prices after good results for December quarter indicates that people have turned bearish and don't believe in India shining story."

He said the brunt of the selling has been borne by mid-cap stocks and the worst for the mid-cap stocks is likely to be over in the next few trading sessions if not already over.

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