The BSE small-cap and mid-cap stocks have underperformed compared to large-cap peers in the first quarter of the current fiscal, as the two indices saw a decline of up to 5 per cent against nearly 3 per cent rise in the broader market benchmark Sensex.
According to a study of indices from April 1, 2013, to June 28, 2013, the BSE small-cap index dropped by 4.96 per cent to 5,643.52 as on June 28. The mid-cap index shed 4.11 per cent to close at 5,964.50 as of June 28.
The BSE benchmark index Sensex, however, saw a gain of 2.81 per cent to 19,395.81 in the period under review.
Market analysts said that mid-caps and small-caps have underperformed compared to large-cap peers primarily due to concerns such as currency fluctuations and low participation from investors.
The rupee has depreciated over 9 per cent against the US dollar since April 2, 2013. The falling rupee had also breached the 60-mark against the dollar last week.
Foreign investments in Indian stocks have also been drying up on fears that the US Federal Reserve will scale back its fiscal stimulus measures.
FIIs have pulled out a record Rs 44,162 crore (over $7.5 billion) from the domestic markets this month amid concerns over a depreciating rupee.
Market experts said in case of a fall in the markets, smaller stocks go down faster than the frontline scrips.
During the period under review, the BSE Sensex touched its 52-week high of 20,443.62 on May 20, 2013.
The mid-cap index tanked to its one-year low of 5,778.97 on June 25, 2013, while the small-cap index slipped to its 52-week low of 5,544.60 on the same day.
“In a bear market, investors tend to invest in large-cap stocks, while they prefer to book profits in smaller stocks.
During the times of uncertainty one witnesses greater losses in mid and small-cap scrips. But when markets rally, these stocks move faster than the blue-chip stocks,” marketmen said.
The mid-cap and small-cap indices track the performance of companies with market capitalisation of one-fifth or one-10th of blue-chip firms.