Mid-, small-cap stocks under pressure; 24 stocks freeze at lower circuits

At 02:04 pm, the S&P BSE Midcap index and the S&P BSE Smallcap index were down 1 per cent and 2 per cent, respectively, as against a 0.23 per cent rise in the S&P BSE Sensex

Shares of mid and small-cap companies came under pressure on Tuesday, falling by up to 12 per cent on the BSE amid profit booking. The S&P BSE Midcap index and the S&P BSE Smallcap index were ended 1 per cent and 2 per cent, respectively. In comparison, the benchmark S&P BSE Sensex was up 0.28 per cent at 54,555 points.

With today's fall, mid- and small-cap indices have corrected 3.3 per cent and 4.6 per cent, respectively from their respective all-time highs touched on August 4, 2021. Prior to that, the S&P BSE Midcap index had rallied 29 per cent and the S&P BSE Smallcap index had zoomed 48 per cent in calendar year 2021.

Individually, JSW Energy from the mid-cap segment while Tata Steel Long Products, Himatsingka Seide, Hindustan Oil Exploration Company, Trident, Neuland Laboratories, Praj Industries, Somany Ceramics, Godawari Power & Ispat and TVS Electronics were among the 23-small-cap stocks that were locked in their respective lower circuit bands on the BSE.

After a strong financial year 2020-21 (FY21), earnings in FY22 began on a healthy note. So far, earnings in April-June quarter (1QFY22) have been in line and the damage from the second Covid wave and consequent lockdowns in Apr-May’21 has been much lesser relative to the national lockdown in Q1FY21.

"Management commentaries, across the board, suggest an improved demand environment post June’21, led by an easing of restrictions, fewer Covid-19 cases, and a pick-up in vaccinations. However, the impact of rising commodity prices and in general higher inflation is being felt on the profit and loss, while asset quality in financials has expectedly weakened sequentially," Motilal Oswal Financial Services said in a recent note. The brokerage firm expects recovery in corporate earnings to continue as the economy opens up with progressively higher vaccinations.

Despite the past few days' correction, JSW Energy, Datamatics Global Services, Steel Strips Wheels, GNA Axles, Sanghi Industries, Inox Wind, Indo Count Industries and Hindustan Oil Exploration have rallied between 30 per cent and 46 per cent in the past one month.