Mid, small-cap indices fall behind

The BSE Mid-cap and Small-cap indices, closed at 6,177 and 5,940 levels respectively, are trading over 30% below their historic highs

Even as the Sensex hit an all-time high after a gap of five years and 10 months, the Mid-cap and Small-cap indices are still far away from their lifetime highs, which they had scaled on January 8, 2008.

The BSE Mid-cap and Small-cap indices, closed at 6,177 and 5,940 levels respectively, are trading over 30 per cent below their historic highs. The Mid-cap index had touched a lifetime peak of 10,245.81 and the Small-cap touched an all-time high of 14,239.24 in January 2008.

Data suggest the BSE Small-cap and BSE Mid-cap indices have underperformed the Sensex in the recent past. So far in the current calendar year 2013, the Sensex has gained 9.1 per cent, while the BSE Small-cap index has lost 19.5 per cent. The BSE Mid-cap index, in the same period, is down by 14 per cent.

“The liquidity is tighter now as compared to what it was in 2008 and the cost of funds is also higher. So, working capital requirement for most Mid-cap companies has risen, which has depressed return on equity (RoE). With a depressed RoE, one can’t have high earnings. Besides, a lot of Mid-caps are vendors to the large companies and are not exporters themselves. It is the export-driven pack that has propelled the Sensex to a new high now,” said Ravi Shenoy, assistant vice-president (mid-cap research), Motilal Oswal Securities.

The Mid-cap and Small-cap indices track the performance of companies with relatively smaller market capitalisation. There are total 654 stocks in the BSE Mid-cap and Small-cap index, which accounts nearly 18 per cent of total BSE market capitalisation.

Among the sector classification five BSE sectoral indices – information technology (IT), bankex, healthcare, fast moving consumer goods (FMCG) and auto have touched new all-time highs in the recent past. Outside of these five sectors, the remaining six sectors have a lot more work to do before getting back to new records. Power, capital goods, metal, realty and oil and gas all hit their record highs in 2007 and 2008; and all five sectors need to rally substantially before they see new highs.

For instance, the consumer durable index trading at 6,261, a 24 per cent lower from its record high of 8,221 touched on December last year. The realty sector that hit its all-time high of 13,848.09 in 2008 is trading way lower at 1,378 levels right now.

Meanwhile, out of 527 actively traded stocks as many as 217 stocks available at half of their market price as on January 8, 2008. Aban Offshore, Suzlon Energy, Financial Technologies, Educomp Solutions, Unitech, Jai Corp, HDIL, IVRCL, Punj Lloyd, HCL Infosystems, Reliance MediaWorks and Lanco Infratech are down sharply between 90-98 per cent from their January 2008 levels.

However, around 200 stocks that recorded gain over the period, the market price of 96 stocks more-than-double during the period. TTK Prestige, Eicher Motors, Page Industries, Hawkins Cookers, Ajanta Pharma, Relaxo Footwear, La-Opala Rg and Symphony have seen over tenfold price appreciation.

 
According to latest shareholding pattern data, individual investors holding in BSE Mid-Cap was 10.4%, while it was 17.35% in BSE Small-Cap. However, they are holding an average 6.6% stake in BSE-100 companies.
 
“With the markets touching new high, the momentum can bring back retail investors back to the markets, which can see mid-caps also move up. We like GRUH Finance, Bajaj Corp, Supreme Industries, United Phosphorous, Unichem Labs, Swaraj Engines, WABCO India and Berger Paints in the mid-cap space,” he adds.

Category/Index	Current Value	All-time high	Date	%chg
Broad
S&P BSE SMALL CAP	5947.15	14239.24	08/01/2008	-58.2
S&P BSE MID CAP	6173.47	10245.81	08/01/2008	-39.7
S&P BSE 500	7694.18	8991.42	08/01/2008	-14.4
S&P BSE 200	2502.22	2776.96	08/01/2008	-9.9
S&P BSE 100	6295.22	6760.43	08/01/2008	-6.9
Sectoral
S&P BSE REALTY	1379.18	13848.09	08/01/2008	-90.0
S&P BSE POWER	1618.16	4929.34	08/01/2008	-67.2
S&P BSE CAPITAL GOODS	9240.45	21020.97	15/11/2007	-56.0
S&P BSE METAL	9288.67	20494.62	04/01/2008	-54.7
S&P BSE OIL & GAS	8910.45	14268.89	15/01/2008	-37.6
S&P BSE CONSUMER DURABLES	6180.61	8221.12	07/12/2012	-24.8
S&P BSE BANKEX	13267.54	15335.89	20/05/2013	-13.5
S&P BSE FMCG	6751.17	7600.65	24/07/2013	-11.2
S&P BSE IT	8455.06	8812.08	15/10/2008	-4.1
S&P BSE HEALTHCARE	9637.82	9979.76	11/10/2013	-3.4
S&P BSE AUTO	12239.78	12263.55	01/11/2013	-0.2
At 1215 hours

Data complied by BS Research