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BSE Sensex near all-time high,but retail investors shy away from mid-cap and small-cap shares

Retail investors are attracted by quick returns generated by smaller companies.

Written by Jash Kriplani | Mumbai | Published: May 16, 2013 12:54:40 am

Even as the BSE Sensex and NSE Nifty are approaching new all-time highs,retail investors appear to be wary of investing in stocks. According to experts,retail investors are still adopting a cautious stand as mid-cap and small-cap shares are trailing in comparison to the performance of blue-chips.

Data highlights that the BSE Small-cap and BSE Mid-cap indices have underperformed the Sensex in the recent past. In the last three months,the Sensex has gained 1.15%,while the BSE Small-cap index has lost more than 7%. The BSE Mid-cap index,in the same period,is down by 2.21%.

Retail investors are typically attracted by the quick returns generated by many of the smaller companies and so the absence of any rally in such stocks have kept them on sidelines,say experts. On March 28,BSE Small-Cap index touched its 52-week low of 5,708. Further,the BSE Mid-Cap index has declined by almost 15% from its 52-week high of 7,391 in January.

“In last five years,market rallies of over 15% have been led by broad-based participation and mid-cap outperformance,but this time rally has been restricted to select large-caps. But,we have seen some pleasant surprises and upward earning revisions due to earlier excessively pessimistic outlook on mid-caps over large-caps,” says Rajesh Cheruvu,chief investment officer,RBS Private Banking.

According to Capitaline data,individual investors holding in BSE Mid-Cap was 8.62%,while it was 9.35% in BSE Small-Cap as of March 2013.

“One can only see movement in the frontline stocks. The rally in benchmark indices has not yet managed to restore confidence in domestic investors. They are cautious due to political uncertainty and poor financials reported by companies,” said Daljeet S Kohli,head of research,India Nivesh.

High volatility has also contributed to the retail investor’s cynicism. “Some have not yet recovered from the shock of 2008,” said another analyst. Incidentally,the volatility index,India VIX, has seen an upward movement since May 2,when the Sensex logged its three-month high.

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