Investor interest in mid-caps on the wane

If the declining delivery volumes are any indication, the investor interest in small and mid-cap stocks seems to be dipping.

The delivery volumes that were 58 per cent of the total traded volume in November, 2004, dropped to about 46 per cent in January-February, 2005.

Mid-cap stocks are defined here as non-A group stocks, and include stocks in the B, B1, S and Z groups.

Delivery volumes which were 42 per cent of the total traded volumes in July, 2004, perked up to 47.8 per cent in August, 2004, and further to 52.19 per cent in September 2004.

The delivery percentage surged to a peak of 57.9 per cent in November 2004 as investors were enthused by the Budget proposal to scrap the long term capital gains tax.

Total traded volumes in non-A groups too fell sharply during January-February, 2005. In January 2005, the total traded volumes declined by 11.2 per cent, while delivery volumes fell sharply by 19.5 per cent.

In 13 trading days of the current month, the trading and delivery volumes fell by 19.6 per cent each.

Market sources say investors are not as enamoured by mid-cap stocks as earlier because of the diminishing rate of return on these stocks in the last two months.

Valuations of mid-cap stocks increased by only 4.6 per cent in January and February "" as measured by movements in the S&P CNX Mid Cap 200 "" whereas valuations jumped by 78 per cent between June 2004 and December 2004. Among the CNX Mid Cap 200 stocks, gainers outnumbered losers at 194:6 between June 2004 and February 18, 2005.

However, the gap closed to 158:42 between December 2004 and February 2005. Losers gained momentum between January and February, 2005, and the ratio stood at 134:66.

A group-wise analysis of delivery volumes shows that investors continued to invest in S and Z group stocks. The delivery volumes in these groups remained unchanged at around 77-78 per cent between July 2004 and February 2005.

However, the delivery volumes in the B1 group declined from a peak of 51.5 per cent of the total traded volume of B1 group stocks in November 2004 to 38.5 per cent in February 2005. The delivery volumes in B2 group stocks declined from 71.2 per cent to 58.4 per cent.