 "Mid- & small-caps: Invest with caution")
Shares of mid- and small-cap companies saw heavy selling pressure on the bourses today, with the S&P BSE mid-cap and small-cap indices falling to 5,869.02 and 5,585.83, respectively, in intra-day deals – their lowest levels in 12 months.
Most stocks from these indices lost 3-20 per cent. Against their May 17 highs, these indices have lost about 10 per cent each, compared with the benchmark S&P BSE Sensex’s 8.6 per cent fall. Among individual stocks, Gitanjali Gems, Jaiprakash Power Ventures, Capital First, Goenka Diamond and Jewels, Tree House Education and Accessories and Prestige Estates Projects lost about 11 per cent each today.
A total of 149 stocks from the mid- and small-cap indices, including VIP Industries, Crompton Greaves, Fortis Healthcare, Jain Irrigation Systems, Oriental Bank of Commerce, Raymond, Balrampur Chini Mills and TVS Motor Company are trading at their 52-week lows. “If you look at the movement since the last few days, large-cap stocks have fallen more than mid-cap and small-cap stocks. Now, the contagion has spread to these stocks,” said Ravi Shenoy, assistant vice-president (mid-cap research), Motilal Oswal Securities.
“There have been corporate governance issues in some of these small-cap companies. Moreover, they are exposed to foreign loans. So, if the economy is slowing, some of these companies do not have the scale to come up,” says A K Prabhakar, senior vice-president (equity research), Anand Rathi.
Trending down
Companies in the gems and jewellery segment skidded up to 20 per cent on concern the steps by the Reserve Bank of India and the Centre to curb gold imports might hit the sector’s growth. TBZ, Shree Ganesh Jewellery, Gitanjali Gems, PC Jeweller and Shree Ganesh Jewellery House fell 6-20 per cent.
Shares of Jaypee Group’s listed companies---Jaiprakash Associates, Jaiprakash Power Ventures and Jaypee Infratech — are trading at 52-week lows on reports Jaypee Cement has shelved a plan to sell its Gujarat unit, as it couldn’t secure the “right” price for it. Jaiprakash Power Ventures tanked 13 per cent to Rs 17.65, while Jaiprakash Associates fell 11 per cent to Rs 51.15; Jaypee Infratech declined 10 per cent to Rs 22.3 on the BSE.
“JP Group has exposure to hydro power, which is facing problems due to the flood in Uttrakhand. Their loan book is also very heavy. The company has been unable to sell any of their units according to the restructuring plan announced earlier. So, all these are impacting the company and, in turn, the stocks,” Prabhakar said.
Outlook
Given the slide, analysts advise caution and suggest investing in companies with strong fundamentals, relatively insulated from the rupee’s adverse movements. “From a stock viewpoint, we are recommending companies that have a domestic flavour and do not have anything to do with the rupee or imports in its model. Among small-caps, we like Suprajit Engineering, which is purely a domestic play. From the mid-cap pack, we like Oberoi Realty from a long-term perspective,” says Shenoy of Motilal Oswal.
Sarabjit Kour Nangra, vice president (research), Angel Broking, says, “There are renewed concerns regarding China, which have impacted the overall sentiment, including those of small-caps. It is a good time to accumulate stocks that have strong fundamentals. One can look at Dishman Pharma and Indoco Remedies at the current levels.”
Prabhakar of Anand Rathi believes the rally in gold is over and government controls and curbs on gold imports would impact the sector. “We are not bullish on these stocks, at least from a one-year perspective. One can look at buying select stocks from the small-cap and mid-cap segments such as Bayer Corp, Emami, Bajaj Corp, M&M Finance and BASF. Through the next 6-12 months, these could surge about 25 per cent from the current levels. In the real estate pack, we like Indiabulls Real Estate, Oberoi Realty and Prestige Estates,” he says.
Most stocks from these indices lost 3-20 per cent. Against their May 17 highs, these indices have lost about 10 per cent each, compared with the benchmark S&P BSE Sensex’s 8.6 per cent fall. Among individual stocks, Gitanjali Gems, Jaiprakash Power Ventures, Capital First, Goenka Diamond and Jewels, Tree House Education and Accessories and Prestige Estates Projects lost about 11 per cent each today.
A total of 149 stocks from the mid- and small-cap indices, including VIP Industries, Crompton Greaves, Fortis Healthcare, Jain Irrigation Systems, Oriental Bank of Commerce, Raymond, Balrampur Chini Mills and TVS Motor Company are trading at their 52-week lows. “If you look at the movement since the last few days, large-cap stocks have fallen more than mid-cap and small-cap stocks. Now, the contagion has spread to these stocks,” said Ravi Shenoy, assistant vice-president (mid-cap research), Motilal Oswal Securities.
“There have been corporate governance issues in some of these small-cap companies. Moreover, they are exposed to foreign loans. So, if the economy is slowing, some of these companies do not have the scale to come up,” says A K Prabhakar, senior vice-president (equity research), Anand Rathi.
Trending down
Companies in the gems and jewellery segment skidded up to 20 per cent on concern the steps by the Reserve Bank of India and the Centre to curb gold imports might hit the sector’s growth. TBZ, Shree Ganesh Jewellery, Gitanjali Gems, PC Jeweller and Shree Ganesh Jewellery House fell 6-20 per cent.
Shares of Jaypee Group’s listed companies---Jaiprakash Associates, Jaiprakash Power Ventures and Jaypee Infratech — are trading at 52-week lows on reports Jaypee Cement has shelved a plan to sell its Gujarat unit, as it couldn’t secure the “right” price for it. Jaiprakash Power Ventures tanked 13 per cent to Rs 17.65, while Jaiprakash Associates fell 11 per cent to Rs 51.15; Jaypee Infratech declined 10 per cent to Rs 22.3 on the BSE.
“JP Group has exposure to hydro power, which is facing problems due to the flood in Uttrakhand. Their loan book is also very heavy. The company has been unable to sell any of their units according to the restructuring plan announced earlier. So, all these are impacting the company and, in turn, the stocks,” Prabhakar said.
Outlook
Given the slide, analysts advise caution and suggest investing in companies with strong fundamentals, relatively insulated from the rupee’s adverse movements. “From a stock viewpoint, we are recommending companies that have a domestic flavour and do not have anything to do with the rupee or imports in its model. Among small-caps, we like Suprajit Engineering, which is purely a domestic play. From the mid-cap pack, we like Oberoi Realty from a long-term perspective,” says Shenoy of Motilal Oswal.
Sarabjit Kour Nangra, vice president (research), Angel Broking, says, “There are renewed concerns regarding China, which have impacted the overall sentiment, including those of small-caps. It is a good time to accumulate stocks that have strong fundamentals. One can look at Dishman Pharma and Indoco Remedies at the current levels.”
Prabhakar of Anand Rathi believes the rally in gold is over and government controls and curbs on gold imports would impact the sector. “We are not bullish on these stocks, at least from a one-year perspective. One can look at buying select stocks from the small-cap and mid-cap segments such as Bayer Corp, Emami, Bajaj Corp, M&M Finance and BASF. Through the next 6-12 months, these could surge about 25 per cent from the current levels. In the real estate pack, we like Indiabulls Real Estate, Oberoi Realty and Prestige Estates,” he says.