A fifth of top 500 stocks down 30% in 2018 even as indices chart new highs

Nearly 70% of the BSE 500 constituents have given negative returns this year

The divergence between the performance of the broader market and benchmark indices has been stark this year. Even as key indices chart new highs, shares of smaller companies are gliding down. 

Of the top 500 stocks, 104 have lost over a third of their market value this year. 

Further, nearly 70 per cent of the BSE 500 constituents have given negative returns this year. This lacklustre performance of mid-cap stocks comes even as the benchmark Sensex is up over 13 per cent year to date. 

Market participants say the mid- and small-cap stocks are losing favour among investors, especially the institutional ones, on account of expensive valuations and dim earnings outlook.

Even in the recent sell-off, the Sensex fell only 1 per cent, while the BSE mid- and small-cap indices have fallen close to 3 per cent each. This underperformance is in contrast with the market trend during the last three years when smaller stocks outperformed the Sensex.

Analysts expect this pressure on the mid- and small-cap stocks to continue in the medium term as markets brace for the forthcoming elections. 

“The market has finally made a top last week and has started correcting to local and global tailwinds, mainly due to the strengthening dollar, growing current account deficit, inflation expectations, global tightening and worsening geopolitical conditions,” said Jimeet Modi, CEO, Samco Securities. He expects downward pressure on stocks as macro issues are not likely to subside soon.

Analysts say smaller companies are more vulnerable amid the deteriorating macro situation. “Though earnings growth is showing signs of a pick-up, we cannot rule out the pressure on companies’ margin on account of the surge in oil prices and rise in yield,” said Vinod Nair, head of research, Geojit Financial.

While some of the worst-performing stocks have fallen on account of negative news flow, there are many stocks which have slumped due to a lack of investor appetite. 

Reliance Naval and Defence, IL&FS, Manpasand Beverages and Jet Airways have lost more than 65 per cent each, featuring in the list of worst-performing stocks of 2018. Indiabulls Ventures is the best-performing stock in BSE 500 with a gain of 196 per cent during the fiscal. NIIT Technologies, Mindtree and V-Mart are among the other top gainers during this fiscal with each of them rallying over 85 per cent.