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Mid-cap, Small-cap indices plunge over 5% as investors book gains

Thus far in FY18, the mid-and small-cap indices have outperformed the frontline benchmarks by rising 22.5% and 29.7%, respectively, as compared to 21.2% gain in the Sensex till Thursday

Deepak Korgaonkar & Puneet Wadhwa  |  Mumbai / New Delhi 


The mid- and small-cap indices lost ground on Friday, as investors booked profit in stocks of these two segments following the Budget proposal to levy 10 per cent long-term capital gains tax (LTCG) on sale of equity investments. Analysts also attributed the fall, especially in these two market segments, to the sharp run-up seen over the past year.

The S&P MidCap and S&P SmallCap indices lost up to 5 per cent on the on Friday. By comparison, the S&P Sensex slipped 2.3 per cent to 35,067.

Also Read: Best days of mid-cap and small-cap segments are over: Samir Arora

In FY18, so far, the mid- and small-cap indices have outperformed the frontline benchmarks by rising 22.5 per cent and 29.7 per cent, respectively, as compared to the 21 per cent gain in the S&P Sensex till Thursday. As many as 51 stocks from the small-cap index hit their respective 52-week lows on Friday. The list includes Allahabad Bank, Dena Bank, Jubilant Industries, Indo Count Industries, Punjab National Bank, Ugar Sugar, Jubilant Industries, and United Bank of India.

“There are two parts to the fall seen today in the market. The broad market is reacting negatively to the excessive focus on rural and social schemes and the return of the tax. There is stock-specific pressure due to unwinding of positions in high beta stocks. The market will take few days to absorb these proposals,” said Hemang Jani, head equity sales & advisory, Sharekhan. The fall has eroded investor wealth by about Rs 4.6 trillion in the equity market. The total market capitalisation of listed companies stood at Rs 148.5 trillion on Friday, against Rs 153.1 trillion on Thursday.

Also read: 2,706 BSE-listed companies to gain from cut in corporate tax rate

Thus far in 2018, the mid- and small-cap indices are down 7 per cent each, against a 3 per cent rise in the Sensex.

“The sell-off has been primarily on account of the sharp run-up seen in mid- and small-cap stocks over the last few months. 2018 may turn out to be a year of individual stock pickings. We foresee a lot of fast churning happening in the mid-cap space — that is, a large number of investors getting rid of over-valued or wrong stocks quickly at much lower prices and then riding on good quality stocks,” said G Chokkalingam, founder and MD

Also read: Budget 2018: Understanding the changes in the tax rules by Arun Jaitley

First Published: Sat, February 03 2018. 01:00 IST