As mid- and small-cap stocks bleed, 80% of traded shares end weak

Our Bureau Updated - January 19, 2018 at 04:00 PM.

Market watchers say the falls were expected as the companies with smaller market capitalisations had begun to get over-heated.

sensex

Mid- and small-cap stocks took the biggest beating on Wednesday, as traders started to sell when the large-cap indices began to crack under pressure. Thus, almost 80 per cent of the traded scrips closed in the red.

The BSE Small-cap index lost 1.76 per cent to close at 11,274.59, while the BSE Mid-cap index shed 0.46 per cent to finish the session at 10,736.42. Of the shares of 2,970 companies traded on the BSE, shares of 2,200 (almost 75 per cent) closed in the red. On the NSE, the situation was no better. In all, 1,293 shares closed in the negative out of 1,635 traded.

However, the benchmarks BSE Sensex and Nifty-50 ended in the green amidst heightened volatility. The benchmark Sensex closed up 0.70 per cent at 24,854.11.

PE multiples prove

Market watchers say the fall was expected as companies with smaller market capitalisations had begun to get overheated. The benchmark Sensex is trading at a price-to-earnings multiple of 18.55. Compare this with the much pricier valuations of smaller-cap stocks. The PE multiple for the mid-cap index is 25.14 while that of the small-cap index is a whopping 59.06.

Siddarth Bhamre, Head — Equity Derivatives and Technicals at Angel Broking said the fall was expected when the mid- and small-cap stocks continued to outperform even when the larger market had begun falling.. “Over the last few years, a lot of domestic inflows have gone into the mid- and small-cap stocks. But after the Nifty broke through 7,500, we saw a lot of profit-booking in mid-caps by retail traders and HNIs who had taken long calls on them.

“In the last one year or so, markets have been falling but it’s not a one-way fall,” Bhamre continues. “You’ll see a 5 per cent correction and then a bounce back. It’s no reason to press a panic button, but there will be some sentimental selling when benchmarks break through crucial supports.”

According to sources, there has been no redemption pressure in mutual funds as yet. MF officials say they continue to receive funds through systematic investment plans.

According to an exchange data, both FIIs and DIIs remained net buyers to the tune of ₹618.79 crore.

Published on January 13, 2016 16:43