Mid, smallcap indices register negative return for 2nd consecutive year

The S&P BSE Sensex and the Nifty50 surpassed the broader market in the calendar year 2019 (CY19) for the second straight year by registering a double-digit returns on the back of strong fund flow from foreign investors in the large-cap stocks.

The S&P BSE Sensex (up 15 per cent) and Nifty50 (up 13 per cent) in CY19 posted their second best performance in the last five calendar years, led by heavyweight stocks. Earlier, in CY17, the benchmark indices had surged in the range of 28 per cent and 29 per cent, respectively.

However, the BSE Midcap and SmallCap indices have slipped 3 per cent and 8 per cent, respectively, thus giving a negative return for the second year in a row. In CY18, the midcap and smallcap indices had tanked 13 per cent and 24 per cent, respectively, compared to a 6 per cent gain in the Sensex. The Nifty rose 3 per cent in the last calendar year.

“CY19 will go down as a good year for the benchmark indices but it was a very narrow market as only 15 large-cap stocks lifted equities higher while the broader market - mid and smallcaps came nowhere close to their January 2018 peaks,” said Gautam Duggad, head of research for institutional equities at Motilal Oswal Financial Services (MOFSL).

In 2020, however, experts believe that the midcap and small-cap indices will outperform the benchmarks after two consecutive years of under-performance. "Emerging markets as an asset class, they say, could start performing better over the next few years after underperforming over the past 10 years," said Deepak Jasani, head - retail research at HDFC securities.

Among individual stocks, heavyweights Reliance Industries (RIL), HDFC Bank and Housing Development Finance Corporation (HDFC) from the Sensex and Nifty outpaced the indices by surging more than 20 per cent. Bajaj Finance and Bharti Airtel, the top two gainers among the indices, were up 61 per cent and 58 per cent, respectively, while ICICI Bank surged 53 per cent.

Foreign portfolio investors (FPIs) pumped in net amount of Rs 99,953 crore ($14.20 billion) in Indian equities during CY19. The net inflow during the year was highest since CY13, when they made net investment of Rs 1.13 trillion ($20.1 billion), data shows. In CY18, FPIs were net sellers to tune of Rs 33,013 crore ($4.4 billion).

“2019 has been more about FII flows and helped performance recently too. Risk sentiment globally, especially around the trade deal between the US-China, may matter more near term,” wrote Gautam Chhaochharia, head of India research at UBS in a recent co-authored report with Dipojjal Saha and Gopal Ritolia.

The Laggards

That said, nearly half stocks from the benchmark indices reported negative returns. YES Bank emerged as the top loser as the scrip tanked 74 per cent during the year. Mahindra & Mahindra (M&M), Hero MotoCorp, Zee Entertainment Enterprises, GAIL (India) and Vedanta plunged in the range of 21 per cent to 37 per cent.

Even quality stocks in the small-and-midcap space saw a sharp double-digit correction, which led to huge losses in investor portfolios. Investors have lost Rs 11 trillion in as many as 299 stocks of the BSE 500, which posted negative returns in CY19.

Of the 299 stocks, 33 stocks fell more than 50 per cent. The list included names such as Eveready Industries, Reliance Capital, Dewan Housing Finance Corporation (DHFL), Coffee Day Enterprises, Vodafone Idea, HEG and Indiabulls Housing Finance.

GAINERS	BSE Price in Rs				LOSERS	BSE Price in Rs
Name	Dec 31, 2018	Dec 27, 2019	YTD  % Change		Name	Dec 31, 2018	Dec 27, 2019	YTD  % Change
Adani Green	41.9	151.1	260.5		Reliance Capital	229.7	13.4	-94.2
Reliance Nippon	159.2	362.4	127.6		DHFL	249.4	16.6	-93.4
AAVAS Financiers	851.3	1,855.2	117.9		Reliance Infra	315.8	26.7	-91.5
HDFC AMC	1,509.9	3,230.6	114.0		Jain Irrigation	69.7	8.0	-88.5
CreditAccess	383.2	774.3	102.1		Reliance Power	28.7	3.5	-88.0
Dixon Tech (India)	2,056.1	3,903.3	89.8		Lakshmi Vilas Bank	86.9	17.6	-79.7
Manappuram Fin	92.9	176.3	89.8		Indiabulls Integrated	374.6	80.4	-78.5
AstraZeneca	1,452.0	2,687.3	85.1		Vodafone Idea	22.8	5.9	-74.3
Balrampur Chini	101.8	184.6	81.3		YES Bank	181.8	48.0	-73.6
Info Edge (India)	1,439.7	2,567.2	78.3		PC Jeweller	86.2	23.5	-72.7

Top gainers/losers from S&P BSE 500 index

Compiled by BS Research Bureau