Great fall: Small, mid-cap stocks still to recover
Sensex has made a strong recovery. But mid-and-small-cap stocks are still struggling to reach the levels they were at during last weekend. Gainers-losers | F and O facts
By TNN |
AHMEDABAD: The sensex has made a strong recovery. But mid-and-small-cap stocks are still struggling to reach the levels they were at during last weekend. Both the mid-and small-cap indices still remain much in the red, down 9.48% and 14.30%, respectively as compared to last Friday.
A similar phenomenon was observed during the big-bang correction in May 2006, where mid-cap and small-cap had a taken bigger beating than frontline stocks. In much the same way, this time too there was a huge sell-off in the small and mid-cap space by investors to meet their margin obligations in the derivatives segment.
Investors had suffered substantial losses due to their leveraged positions in the derivatives segment. ‘‘ Most of them had sold mid-cap and small-cap stocks just to meet their margin call requirement ,’’ said Dinesh Thakker, managing director, Angel Broking. Thakker said that normally, when the markets regain after a downfall, FIIs and domestic funds lap up large-cap stocks which are much attractive due to their valuation.
A similar phenomenon was observed during the big-bang correction in May 2006, where mid-cap and small-cap had a taken bigger beating than frontline stocks. In much the same way, this time too there was a huge sell-off in the small and mid-cap space by investors to meet their margin obligations in the derivatives segment.
Investors had suffered substantial losses due to their leveraged positions in the derivatives segment. ‘‘ Most of them had sold mid-cap and small-cap stocks just to meet their margin call requirement ,’’ said Dinesh Thakker, managing director, Angel Broking. Thakker said that normally, when the markets regain after a downfall, FIIs and domestic funds lap up large-cap stocks which are much attractive due to their valuation.
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Small and mid-cap catch their fancy once the large-cap stocks witness momentum . The prices of certain quality mid-cap stocks are offering good value right now and are expected to stage a recovery, he added.
Even on Friday, the overall market breadth was positive with gainers outnumbering losers. The advance to decline ratio on BSE was was 4:3.
Nitesh Shah, vice president of Kotak Securities said, ‘‘ This shows that the mid-cap stocks are gaining ground gradually. But small-cap stocks are still gasping.’’ He added that since large number of retail investors have lost lot of wealth in this particular space, they are not coming forward to take any fresh positions. This could also be the reason for a slow recovery of mid-cap and smallcap stocks, he added.
Even on Friday, the overall market breadth was positive with gainers outnumbering losers. The advance to decline ratio on BSE was was 4:3.
Nitesh Shah, vice president of Kotak Securities said, ‘‘ This shows that the mid-cap stocks are gaining ground gradually. But small-cap stocks are still gasping.’’ He added that since large number of retail investors have lost lot of wealth in this particular space, they are not coming forward to take any fresh positions. This could also be the reason for a slow recovery of mid-cap and smallcap stocks, he added.
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