12,352.35-3.15
Stock Analysis, IPO, Mutual Funds, Bonds & More

Why your smallcap, midcap portfolio could hit air pocket

The ride has been topsy-turvy in the midcap and smallcap space over the past week.

, ET Bureau|
Updated: Jun 02, 2017, 08.25 AM IST
0Comments
Between May 22 and May 24, BSE MidCap and SmallCap indices lost about 3% each, but recovered all the losses in the short covering-led rally in the last two sessions of the previous week.
Between May 22 and May 24, BSE MidCap and SmallCap indices lost about 3% each, but recovered all the losses in the short covering-led rally in the last two sessions of the previous week.
Mumbai: Mid and small-cap shares have fallen sharper than blue chips in a swinging market in the past one week, making investors wary of such stocks. While rebounds have been equally strong, investors may have to brace for heightened volatility in the days to come as many stocks are precariously perched after the scorching rally in the past three years.

“Mid and small-cap stocks always carry higher volatility, but now as they have moved much ahead of their fundamentals, coming days would be not so great for them,“ said Raamdeo Agrawal, joint managing director, Motilal Oswal Financial Services. “Markets, especially midand small-cap stocks must cool down so that long-term money enters these segments to lower volatility."

The ride has been topsy-turvy in the midcap and smallcap space over the past week. Between May 22 and May 24, BSE MidCap and SmallCap indices lost about 3% each, but recovered all the losses in the short covering-led rally in the last two sessions of the previous week. On Monday , these in dices fell about 1% each but again recovered some losses.

The story was the same with Retail individual stocks as well. For investors instant should, Kaveri Seed avoid Company taking which fell 12.4% be hefty tween May 22 and 24 has leverage bounced back 18.6% since then.positions, ​ Rashtriya Chemicals & market say Fertilizers recovered 14.8% experts in the last four sessions after falling 14.5% between May 22 and May 24.

“Midcaps are a brave heart's game now," said Hemant Nahata, derivatives analyst at IIFL. “The lot sizes of various midcap companies' futures are very high, costing as high as Rs 12 lakh for one lot. In this case, if there is a big fall, retail investors tend to lose significantly .Retail investors should avoid taking hefty leverage positions,“ said Nahata.

From their respective lifetime high levels, BSE MidCap and SmallCap indices are down 5% and 5.7%, respectively . The carnage is deeper at the stock level and one should not hope for a major recovery, said analysts.

“Most of them (midand small-cap stocks) are richly valued, so there's very little scope for them to move up,“ said Amit Khurana, head of research, Dolat Capital.
Comments
Add Your Comments
Commenting feature is disabled in your country/region.

Other useful Links


Copyright © 2020 Bennett, Coleman & Co. Ltd. All rights reserved. For reprint rights: Times Syndication Service