Mid- and small-cap stocks bore the brunt of the market slide, indicating that panicky high net-worth investors (HNIs) and smaller investors may be exiting these stocks in a hurry to meet margin requirements on their highly-leveraged equity derivatives trading.
On a day when the Sensex tumbled by 3.42 per cent, small and mid-cap indices were down by a sharp 4.35 and 4.55 per cent, respectively.
At one point, the mid-and small-cap indices were down nearly 6 per cent.
The BSE Mid-cap and Small cap indices settled at 6,804.39 points and 8,409 points, respectively at the end of today’s trading session.
Analysts attribute this fall to large leveraged positions of investors in the derivatives segment. Investors were forced to sell in small and mid-cap stocks to provide margins for their leveraged positions in derivatives.
BSE’s mid cap index has fallen 32 per cent since the beginning of this calendar year and the small-cap index has fallen 38 per cent since January 1.
Both these indices had touched a high on January 8, when the mid- cap index galloped to 10,245 points.
Some analysts are also of the view that people have been selling mid-cap stocks to buy into large caps stocks as valuations have become quite attractive.
Ajit Roongta, Fund Manager, IDBI capital markets said: “These stocks have been falling in the last two-three weeks and did not participate in the market rally. The Undertone has been bearish in this sector and investors, who have huge positions in the F&O segment, are selling in cash, mainly mid- and small-caps, to fund these positions. Liquidity has become a major issue and that is why people are selling irrespective of fundamentals.”
A few months ago, several mutual funds had launched schemes dedicated to mid-caps and small-caps.
However, going by BSE data, it seems there have been hardly any buyers of these stocks.
Adds Roongta: “It might be that mutual funds are sitting on cash fearing redemption pressures on March 31, the deadline for advance tax payment”. Birla SunLife Mid Cap Fund has a cash position of 10 per cent in this fund.
A. Balasubraniam, chief investment officer, Birla SunLife Mutual fund said: “There has been a liquidity crunch in Indian markets and the sentiment has become so weak that nobody is willing to buy. Uncertain global cues has made the risk appetite poor, so profit booking is taking place. But, valuations look decent now.”
The major losers among mid-caps were Ansal Industries, down 13.59 per cent to Rs 165, Adlabs Films, down 13.18 per cent to Rs 607.95, Chambal Fertilizers, down 11 per cent to Rs 45.30 and Educomp Solutions, down12.82 per cent to Rs 3,383.70.
Among small-caps, the stocks that slumped were Alok Industries (down 8.59 per cent to Rs 59.05), CenturyPly (down 6.22 per cent to Rs 633), Deepak Fertilisers (down12.15 per cent to Rs 99.45).
The only major gainer among small-caps was English Indian Clays, gaining by 20 per cent to Rs 699.
On a day when the Sensex tumbled by 3.42 per cent, small and mid-cap indices were down by a sharp 4.35 and 4.55 per cent, respectively.
At one point, the mid-and small-cap indices were down nearly 6 per cent.
The BSE Mid-cap and Small cap indices settled at 6,804.39 points and 8,409 points, respectively at the end of today’s trading session.
Analysts attribute this fall to large leveraged positions of investors in the derivatives segment. Investors were forced to sell in small and mid-cap stocks to provide margins for their leveraged positions in derivatives.
BSE’s mid cap index has fallen 32 per cent since the beginning of this calendar year and the small-cap index has fallen 38 per cent since January 1.
Both these indices had touched a high on January 8, when the mid- cap index galloped to 10,245 points.
Some analysts are also of the view that people have been selling mid-cap stocks to buy into large caps stocks as valuations have become quite attractive.
Ajit Roongta, Fund Manager, IDBI capital markets said: “These stocks have been falling in the last two-three weeks and did not participate in the market rally. The Undertone has been bearish in this sector and investors, who have huge positions in the F&O segment, are selling in cash, mainly mid- and small-caps, to fund these positions. Liquidity has become a major issue and that is why people are selling irrespective of fundamentals.”
A few months ago, several mutual funds had launched schemes dedicated to mid-caps and small-caps.
However, going by BSE data, it seems there have been hardly any buyers of these stocks.
Adds Roongta: “It might be that mutual funds are sitting on cash fearing redemption pressures on March 31, the deadline for advance tax payment”. Birla SunLife Mid Cap Fund has a cash position of 10 per cent in this fund.
A. Balasubraniam, chief investment officer, Birla SunLife Mutual fund said: “There has been a liquidity crunch in Indian markets and the sentiment has become so weak that nobody is willing to buy. Uncertain global cues has made the risk appetite poor, so profit booking is taking place. But, valuations look decent now.”
The major losers among mid-caps were Ansal Industries, down 13.59 per cent to Rs 165, Adlabs Films, down 13.18 per cent to Rs 607.95, Chambal Fertilizers, down 11 per cent to Rs 45.30 and Educomp Solutions, down12.82 per cent to Rs 3,383.70.
Among small-caps, the stocks that slumped were Alok Industries (down 8.59 per cent to Rs 59.05), CenturyPly (down 6.22 per cent to Rs 633), Deepak Fertilisers (down12.15 per cent to Rs 99.45).
The only major gainer among small-caps was English Indian Clays, gaining by 20 per cent to Rs 699.
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