Small, mid-caps defy dip

STOCK REPORT

Small- and mid-cap stocks bucked an otherwise lacklustre trading session for the second day on Friday after investors bought into these stocks, which have been outsmarted by their larger peers in the recent run-up in prices.

The Bombay Stock Exchange (BSE) Sensex, the benchmark index, ended lower by 86.53 points, or 0.44 per cent, to 19,698.36 points, but the highlight of the day was sharp rallies at the small- and mid-cap counters.

The BSE Small-Cap Index was up by 1.5 per cent at 10,380.73 points, while the BSE Mid-Cap Index ended with a gain of 1.17 per cent at 8,512.38 points. The BSE FMCG Index (up over 4 per cent) was the top sectoral gainer led by ITC (up 8.17 per cent at Rs 205.15).

During the week, both mid- and small-cap indices gained up to 6.5 per cent. The bellwether 30-stock index gained by 4.2 per cent in the same period.

About 529 stocks hit the upper circuit as the overall market breadth showed 1,909 stocks ending higher compared with Thursday's performance, while 912 stocks ended in the negative territory.

Mid-cap stocks such as Chambal Fertilisers and Chemicals (up 28.26 per cent at Rs 72.40 a share), Ballarpur Industries (up 10.77 per cent to Rs 163), Bombay Rayon (up 10.61 per cent to Rs 334.05) and small-caps such as Balmer Lawrie (up 18.28 per cent to Rs 674.35), Electrosteel Castings (up 15.28 per cent to Rs 79.60) and Escorts (up 14.64 per cent to Rs 142.10) went through the roof in a frenzied buying in the Friday's trading session.

Stock brokers point out that foreign institutional investors' dominance in the stock markets have made Sensex stocks too expensive while there was more value in some of the mid- and small-cap stocks, which have not been able to keep pace with the recent market run-up.

Brokers say that while frontline companies are trading with a price-earnings (PE) ratio of 40-50 times, some of the fundamentally strong companies in the mid- and small-cap segments are still available at a PE ratio between 1 and 8.

The stories in select small- and mid-cap stocks are unfolding slowly, say brokers.