Small-cap, mid-cap stocks lose to bluechips this year

The BSE small-cap and the mid-cap have underperformed their large-cap peer this year so far, as the two indices saw a decline of up to 26% against 18% fall in the broader market benchmark Sensex.

As per the study of indices from December 31, 2010, till date, the BSE small-cap index dropped by 26.25% to settle at 7,131.48 as on August 30. The mid-cap index shed 19.59% to close at 6,273.60 in the previous trading session.

The BSE benchmark index Sensex fell by 18.68% to close at 16,676.75 on August 30, from a peak of 20,509.09 as on December 31, 2010.

According to market experts, since November 2010 onwards the small-cap and mid-cap sector have been under pressure with a string of negative sentiments plaguing the investor confidence, including the 2G controversy, rising inflation and reports of stock price manipulation.

"Buying sentiments have been weak and there is no near term trigger for these sectors and there is an uncertainty when both these sectors will make a comeback in the near future," Prashanth Prabhakaran, President, Retail Broking, India Infoline, said.

During the period under review, the BSE mid-cap index fell to one-year low of 6,014.18 on August 26, while the small-cap index touched the 52-week low of 6,892.98 on August 29 this year.

Analysts also said that mid-caps and small-caps have considerably underperformed their large-cap peers primarily due to macroeconomic concerns such as rising interest rates, commodity prices and inflation, coupled with low participation from investors.

"It is the retail investors who are the major participants in mid-cap and small-cap stocks and since last few months the retail segment activity in the market has shrinked significantly. This is mainly because of absence of any major positive trigger in the market," CNI Research Chairman and Managing Director Kishore P Ostwal said.

The mid-cap and small-cap indices track the performance of companies with market capitalisations that are a fifth or a tenth of that of blue-chip firms.