Mid-caps advance as Sensex gives up gain

India's mid- and small-cap stocks rose for a second session, helped by health care companies and utilities, even as the benchmark gauge gave up gains to close little changed before the expiry of derivative contracts on Thursday.
 

Divi's Laboratories capped its biggest two-day gain since August 2015. The stock lost a record 31% over Friday and Monday amid observations made by the US Food and Drug Administration about the company's manufacturing facility. JSW Energy surged as much as 6.4% in a second day of advances after the board approved a fundraising plan. Mangalore Refinery & Petrochemicals rallied 8.9%, the most in a month.
 
The S&P BSE Sensex climbed as much as 0.8% as traders closed bearish bets before the expiry of the December derivatives expiry. The gains evaporated in the final hour of the session characterised by below-average volumes. With foreign investors away on year-end holidays, attention turned to mid-sized companies, according to Citrus Advisors.
 
"Lower foreign investor activity and relatively higher participation by local funds due to the holiday season is the reason why mid-caps continued to beat the large-caps today,” Sanjay Sinha, founder of Citrus, said by phone from Mumbai.
 
"Local funds direct more money to mid caps than overseas investors. That's why mid-caps have outperformed this year."
 
Local funds have bought $6 billion of shares since January 1, extending last year's record inflow of $10 billion, according to data compiled by Bloomberg.
 
A bulk of the purchases have been in companies whose earnings are tied to the local economy such as providers of financial services, staffing firms and operators of diagnostics chains. That's pushed up the S&P BSE MidCap Index 5.6% this year, compared with a 0.4% gain in the Sensex.
 
Foreign investors have sold about $875 million of Indian shares this month, adding to $2.6 billion of withdrawals in November. That's pared this year's inflow to $3.2 billion.

Bloomberg