Mid- and small-caps were in for a virtual bloodbath on Thursday, once again exposing the vulnerability of this segment to market vagaries.
Among the slot, HDIL most bore the brunt, which tanked 22.44 per cent, at Rs 74.65 after the company’s promoter announced partial stake sale to fund land acquisition. This was in addition to Wednesday’s fall of 14 per cert. The company, however, denied rumours of financial trouble and bankruptcy stating that it was comfortable with its debt repayment commitments.
The BSE midcap and BSE small cap indices tumbled throughout the day to end at 6,848.68 and 7,069.84, down 2.51 per cent and 2.44 per cent. The Sensex too fell 0.51 per cent to close at 19,923.78.
Different views
While some brokers and market participants attributed the sharp fall to broker’s margin calls getting triggered, others blamed large number of pledged shares by promoters of most of the small- and mid-cap companies for the downfall.
Some even attributed it to profit-booking following a steady rally in these stocks lately.
“Based on the feedback we got from brokers and market participants, we believe margin calls got triggered in these stocks. It was mostly seen in overleveraged stocks which had recently rallied prompting heavy profit booking by traders.
“However, unlike last year when a similar crash in mid-caps occurred, this time a lot of stocks were able to absorb the prices and limit the pain,” said Nitin Jain, Head Capital Markets (Individual Clients Group), Edelweiss Capital
According to Jagannadham Thunuguntla, Strategist and Head of Research, SMC Global Securities, the question on the traders mind after the fall is whether this sharp fall would spill over to the Sensex and large-caps as well.
“We have seen some serious sell-offs today in stocks across all sectors which had rallied over the past few months. While the mid-caps only saw the price damage, it was the large-caps, which witnessed a sentimental damage that could be more potent by way of discouraging retail investors to enter the market,” he added.
However offering a different view, Saurabh Mukherjea of Ambit Capital said: “The fall in mid-caps and small-caps was mainly triggered owing to bellwethers such as Tata Motors reporting disappointing results coupled with the Finance Minister dropping hints of taxing rich.”
Manisha.jha@thehindu.co.in