Mid-, small-cap stocks still under bear hug

Our Bureau Mumbai | Updated on March 12, 2018 Published on February 21, 2013


Many shares witness value erosion of around 40% in 2013

The sharp decline of over 300 points in the BSE Sensex and NSE dipping below 5,900 might have caught the headlines, but it is the small- and mid-cap stocks which have seen a sustained sell-off in 2013 so far.

According to analysts, risk-off strategy of the investors, particularly domestic institutions, have impacted these segments.

52-week lows

While the Nifty fell 1.4 per cent, the CNX mid- and small-cap indices crashed 6.84 per cent and 7.74 per cent respectively this calendar year. Similarly on the BSE, the Sensex slipped 0.96 per cent, while the BSE mid- and small-cap indices slumped 7.24 per cent and 11.24 per cent respectively.

In fact, as many as 151 stocks have registered their 52-week lows on the BSE today, and a few of them are ruling at their life-time lows.

Several of these stocks suffered a virtual bloodbath on the bourses last month triggered by a margin call after the pledged shares were offloaded in the market by lenders. Stocks such as HDIL, Shiv-Vani Oil, IVRCL and Prakash Steelage, which tanked sharply last month, are yet to recover from the bear haemorrhage.

Flowing negative news

According to Anand Kuchelan, V-P Research, Padmakshi Financial Services, the stocks have continued to tumble owing to steady flow of negative news surrounding these companies besides weak fundamentals and problems of high leverage and debt burden.

“Last two weeks has seen a 30 to 40 per cent fall in a select mid- and small-cap stocks alone.

“Besides, weak third quarter results and corporate governance issues in a few companies impacted these stocks.”

“So, fundamentally these companies have never managed to get back on track and with global uncertainty and upcoming Budget, investors should ideally take a wait-and-watch approach to these firms,” he added.

However, some analysts believe that the kickstarting of interest rate cycle and gradual unwinding of debt positions could result in a recovery of the mid-cap and small- cap stocks.

“These stocks have seen huge redemptions by domestic mutual funds and domestic individual investors, as well as trimming of positions by FIIs. But, we are expecting a 100-basis-point rate cut in this calendar year which could help improve their debt burden and bottomline.

“This coupled with improvement in the macro economy could script a comeback for these stocks,” added Rikesh Parikh, Vice-President–Equities, Motilal Oswal Securities.


Published on February 21, 2013
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