Ahead of Delhi elections, traders dump mid, small-caps
“Uncertainty over Delhi election results has adversely impacted market sentiments and this has led to the recent selloff in midcaps,” said Kunj Bansal of Centrum.
By ET Bureau | Updated:
MUMBAI: Mid- and small-cap shares led the stock market slide on Friday as traders cut their positions ahead of the Delhi election results on Tuesday. Brokers said market participants are worried that a victory for the Aam Admi Party (AAP) over the Bharatiya Janata Party (BJP) would dampen sentiment in the short term.
“Uncertainty over Delhi election results has adversely impacted market sentiments and this has led to the recent selloff in midcaps,” said Kunj Bansal, executive director & chief investment officer at broking firm Centrum.
BSE’s mid-cap index fell 1.1%, while the smallcap index declined 1.8% on Friday. The Sensex dropped 0.5%. Foreign institutional investors (FIIs) net sold shares worth Rs 96 crore on Friday. Analysts said traders have partially unwound the trading positions created on borrowed money to avoid losses if the Delhi election results go in favour of AAP. “Significant amount of leveraged positions in midcap space has been reduced over the last few days, as traders have become wary about the outcome of Delhi election results,” said Bhavin Desai, equity derivatives analyst at Motilal Oswal Financial Services. “We have seen unwinding of market positions in high-beta counters as shaky broader market sentiments have turned many traders risk averse,” he said.
In the last year or so, mid- and small-cap stocks have seen their best run since 2009 with many of them more than doubling. The rally has resulted in valuations of many of these stocks quadrupling, raising concerns that the best is over for mid-caps for the moment.
Disappointing results by some of these companies have also weighed down sentiment. “Leading mid-cap companies such as TTK, Havells, V Guard, Finolex and others have reported disappointing results, impacting earnings expectations of mid-cap companies,” said Bansal. “Valuations of many mid-cap companies are on the higher side,” he said.
Analysts said for the rally in mid- and smallcap shares to resume, it would be crucial for market sentiment to stay intact as valuations of several of them are stretched.
“Uncertainty over Delhi election results has adversely impacted market sentiments and this has led to the recent selloff in midcaps,” said Kunj Bansal, executive director & chief investment officer at broking firm Centrum.
BSE’s mid-cap index fell 1.1%, while the smallcap index declined 1.8% on Friday. The Sensex dropped 0.5%. Foreign institutional investors (FIIs) net sold shares worth Rs 96 crore on Friday. Analysts said traders have partially unwound the trading positions created on borrowed money to avoid losses if the Delhi election results go in favour of AAP. “Significant amount of leveraged positions in midcap space has been reduced over the last few days, as traders have become wary about the outcome of Delhi election results,” said Bhavin Desai, equity derivatives analyst at Motilal Oswal Financial Services. “We have seen unwinding of market positions in high-beta counters as shaky broader market sentiments have turned many traders risk averse,” he said.
In the last year or so, mid- and small-cap stocks have seen their best run since 2009 with many of them more than doubling. The rally has resulted in valuations of many of these stocks quadrupling, raising concerns that the best is over for mid-caps for the moment.
Disappointing results by some of these companies have also weighed down sentiment. “Leading mid-cap companies such as TTK, Havells, V Guard, Finolex and others have reported disappointing results, impacting earnings expectations of mid-cap companies,” said Bansal. “Valuations of many mid-cap companies are on the higher side,” he said.
Analysts said for the rally in mid- and smallcap shares to resume, it would be crucial for market sentiment to stay intact as valuations of several of them are stretched.
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