Mid- and small-caps have been late to join the party in this bull run, but they’ve soared fast in the last nine months. From its lows hit in August last year, the BSE Mid-cap index is up 47 per cent and the BSE Small-cap index has gained 52 per cent. In comparison, the Sensex is up 35 per cent.

FIIs obviously played a key role in the remarkable bounce back, showering attention on mid-cap stocks. Aggregate FII holdings in the BSE Mid-cap index moved to 14.5 per cent in March, compared with 13.6 per cent in September 2013.

Gunning for mid-caps

FIIs raised stakes in 286 stocks of the CNX 500, between September last year and this March, shareholding patterns show. Half the stocks belonged to the mid-cap space.

Stocks such as TVS Motor, Aurobindo Pharma, Arvind, IRB Infra, HDIL, Kajaria Ceramics, Crompton Greaves and Bajaj Electrical, which more than doubled from August last year to date, saw a significant rise in FII stake.

Also, the FIIs did not aggressively churn their mid-caps. Of the stocks in which they cut stakes, less than a third were mid-caps.

Goodbye small-caps

This contrasts sharply with FII action in small-cap stocks, where selling was much more pronounced.

FII holding in the BSE Small-cap index dropped slightly to 7.2 per cent in March compared with 7.4 per cent in September 2013. Dewan Housing, NIIT, Radico Khaitan, Escorts and JK Tyre saw FIIs cut stake by more than 5 percentage points between September 2013 and March.

But even with the two indices leaping ahead, they are yet to reach their 2008 highs, quite unlike the market bellwethers. The BSE Mid-cap index is 24 per cent below the high of January 2008. Current price earnings multiple of 10 times is also below the 22 times the index traded at that point in time. The BSE Small-cap index is even worse, 44 per cent below its 2008 high.

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