Retail investors bear brunt of mid-cap slide

Small- and mid-cap stocks bore the brunt of the market fall today, leaving retail investors an anguished lot.

The Bombay Stock Exchange's small-cap index was the biggest loser, with about 5 per cent of its valuations wiped off, while the mid-cap index lost more than 4 per cent.

"Considering the run-up in prices, I think we should not be surprised by the fall. We may even see a May-like situation," said Shankar Sharma, director of First Global. The bellwether Sensex had dived by about 4,000 points in the last May-June crash.

Some big mid-cap closers were IDBI Ltd (down 11.26 per cent to Rs 86.70), Escorts (down 10.25 per cent to Rs 126.05), VSNL (down 10.21 per cent to Rs 440.05), Shipping Corporation (down 8.88 per cent to Rs 183.20), Arvind Mills (down 8.73 per cent to Rs 51.20), MTNL down 8.50 per cent to Rs 143.65), Polaris Lab (down 8.06 per cent to Rs 202.50) and Neyveli Lignite (down 7.67 per cent to Rs 57.15).

"Signs of weakness in small- and mid-caps were evident last week itself. There was a general feeling of discomfort in realty stocks after the hike in interest rates on home loans," said Jayant R Pai, vice-president of Parag Parikh Financial Advisory Services.

"Small investors are the real losers in the mid-cap fall as the rise in large caps had kept them away from such stocks. It was likely that retail investors overpaid for mid-caps and small caps," he added.

Realty was another sector that saw erosion in values. Parsvanath Developers was down 11.06 per cent to Rs 301.70, Unitech was down 4.60 per cent to Rs 422.45, Sobha Developers was at Rs 826.10, down 9.55 per cent, Lanco Infra was down 11.06 per cent to Rs 190.65, Akruti Nirman was down 18.88 per cent to Rs 453.60 and Mahindra Gesco Developers was down 4.60 per cent to Rs 615.65.

"The stock prices of realty companies have gone up too fast. Investors should be aware that there would also be a downfall in such kind of sharp rise in valuations," said First Global's Sharma.

He said the rising interest rates on home loans and the squeeze on bank lending to real estate sector had contributed to this sharp downturn today. "It (fall in realty stock prices) was a time bomb waiting to happen," said Jayant Pai of Parag Parikh.

Among the recent listing, the stocks that fell the most include Pochiraju Industries (down 10.07 per cent to Rs 44), Autoline Industries (down 7.34 per cent to Rs 385.65), Shree Ashtavinayak Cine Vision Ltd (down 9.98 per cent to Rs 160) and Pyramid Saimira Theatre (down 5 per cent to Rs 398.85).