Over the last one month, while the benchmark Sensex at BSE moved from one milestone to another and crossed the 31,000-mark on Friday, investors turned cautious on smaller companies and during the same period the mid cap and small cap indices witnessed correction thereby bringing down the overall market capitalisation of BSE.
During the period between April 26 and May 26, while the Sensex rallied 2.97 per cent to close at 31,028, the mid cap and small cap indices fell 1.65 and 1.3 per cent respectively. The decline in mid cap and small cap indices also had an impact on the BSE market capitalisation despite a strong rally in benchmark Sensex.
While Sensex briefly crossed the $2 trillion market capitalisation on May 17 in line with strengthening rupee and rise in markets, the decline in mid and small cap indices has resulted into a decline in BSE market capitalisation by over Rs 2 lakh crore and the BSE market cap has come down from a high of Rs 127,90,255 crore on May 16 to Rs 125,63,812 crore on Friday. As of Friday’s closing of rupee against the dollar, the BSE market cap stood at 1.94 trillion.
The last one month performance of the small and mid cap indices is in sharp contrast to the performance in the one year period between April 2016 and April 2017. During the one year period while Sensex rose 15.9 per cent, the mid and small cap indices at BSE rose 33 per cent and 37 per cent respectively thereby significantly outperforming the 30-scrip benchmark Sensex.
Jayant Manglik, president, retail distribution, Religare Securities advised investors to practice caution in the mid and small cap segment. “The week ended on a strong note and we feel it’ll continue next week as well. Any dip in between should be considered as buying opportunity in index majors. However, midcap and smallcap counters should be dealt with caution as they may consolidate further prior to any significant rebound,” said Manglik.
Even as mid and small cap indices fell in the latest 1000 point Sensex rally, some feel that the markets are set to rise further. “Sensex attaining the 31,000-level is one more milestone in this upmove with the latest rise of 1,000 points taking just one month and at the same time Sensex grew 20 per cent from its recent bottom in just 5 months. We seem to be headed higher with or without some intermittent corrections thrown in,” said Deepak Jasani, retail research head at HDFC Securities.
Market participants say that there has been a correction in the mid and small cap companies as they had rallied strongly over the last one year. “At the current level, even as there are opportunities in the mid and small cap segment, investors should look to primarily invest into large cap funds and companies or into high quality companies in mid and small cap segment,” said the CEO of a leading brokerage house.