Big gains on D-Street with mid-cap indices and small-cap index making new highs

MUMBAI: Small is big. Investors and market experts worried over the tepid performance of the Nifty and the Sensex need only to look at the broader market where the picture appears to be considerably brighter.
The mid-cap indices on both the BSE and the NSE have been hitting new all-time highs for the past three days while the Nifty smallcap index is at a seven-year high.

The BSE small-cap index is still off its all-time high but all the four indices have been rising continuously for the past eight days, gaining 7-13.5%.

The gloom surrounding large-cap stocks does not seem to be getting reflected in the broader market and there could be a number of reasons for this.

The Nifty and the Sensex have been dragged down by the performance of public sector banks, capital goods and metal and mining firms.

Financial sector stocks have a weightage of 28% in both the Nifty and the Sensex.

The weightage of capital goods is over 7%. These sectors have performed poorly in the past one year and concerns over non-performing loans and investment revival are weighing on investors’ minds.

It is no surprise therefore that the Nifty and the Sensex have gained only 5.2%.

In comparison, the mid-cap indices comprise of companies from diverse industries. The BSE mid-cap index has 247 companies and the small-cap index has 477 companies.

The NSE small- and mid- cap indices have 100 companies in each.

As a result, weightage of banks and finance industry is less than 8% in these indices. Stocks such as Bharat Electronics, United Breweries, Century Textiles, Reliance Communications have led the gains for the mid-cap indices.

The other top mid-cap performers in the last eight days are Vakrangee, Advanta, HDIL, Network 18 and JK Tyre, each gaining 32%-40%. Ess Dee Aluminium, Panacea Biotec, Zen Technologies, Visagar Polytex and Kitex Garments are among the top small-cap performers.

Historical data suggests that the midcap and the small-cap indices underperformed the benchmark indices in bearish times and outperform in the bull runs.

Since the lows of August 2013, the BSE mid-cap index has gained 109% and the small-cap index has gained 128%. The Sensex has gained only 56% in this period.