Mid, small-cap shares plunge on profit booking

The BSE mid-cap and small-cap indices have fallen nearly 2% each compared to 1% decline in S&P BSE Sensex.

Shares of mid-cap and small-cap companies are under pressure in trade today, falling by as much as 10% on the Bombay Stock Exchange (BSE) on profit booking.

The BSE mid-cap and small-cap indices have fallen nearly 2% each compared to 1% decline in benchmark index S&P BSE Sensex at 1500 hours.

Financial Technologies, Aban Offshore, Info Edge India, Just Dial, Oriental Bank of Commerce, Biocon, KPIT Technologies, SKS Microfinance, TBZ, Kolte Patil Developers, Sasken Communication Technologies, National Fertilisers and JK Tyre are some of the stocks that have tanked over 5% each.

The market sentiment was hit adversely by Reserve Bank of India (RBI) governor Raghuram Rajan's comments on Thursday, that inflation is a destructive disease which is forcing the central bank to keep interest rates high.

Raghuram Rajan called inflation a "destructive disease" that was forcing the central bank to keep monetary policy tight, reports suggest.

The central bank’s third quarter review of monetary policy for 2013-14 is scheduled on 28 January 2014. The RBI kept its main lending rate viz. the repo rate unchanged after its last policy review in December and said at that time that it expected inflation to ease in the following months.

We expect RBI to hold rates in this meeting on the back of moderation in headline CPI (consumer price index) and WPI (wholesale price index) data. However, the core inflation will need to moderate, for the RBI to change its monetary stance, says Dipen Shah, Head- Private Client Group Research, Kotak Securities.

Currently, benchmark indices are trading at valuations which are near the average of the long-term band, based on consensus estimates. We believe, markets need to get more comfort on growth and inflation for valuations to improve from current levels, adds analyst.

Hit hard

Among the individual stocks, KPIT Technologies is down 5% at Rs 151, extending its previous day’s 14% fall on reporting 8.9% quarter-on-quarter  decline in consolidated net profit at Rs 60.78 crore for the three months ended December 2013.

Sasken Communication Technologies has tanked 18% in past two trading sessions after the stock turned ex-dividend yesterday. The stock is down 5.5% at Rs 169. In celebration of its 25th year since incorporation, the board of directors on January 20 declared a special dividend of Rs 22.50 per share.

Just Dial is trading lower by 5.3% at Rs 1,581 after hitting low of Rs 1,545 on the BSE.  The stock had rallied 27% in past one month.