Shares of small companies witness fresh bout of selling on Wednesday

Shares of small companies witnessed a fresh bout of selling on Wednesday with the NSE Nifty Smallcap 100 index dropping 2.3 per cent even as the benchmark Nifty50 declined 0.9 per cent. The index of companies, with market capitalisation between Rs10 billion and Rs70 billion, has fallen more than a per cent in 33 of the 121 trading sessions this year — 28 per cent of the time. It has seen a fall of 2 per cent or more on 12 occasions, with several of its components correcting 10 per cent or more in a single session regularly.
 

Wednesday’s fall comes on the back of a global risk off due to concerns over global trade war. The sharp fall in rupee and spike in oil prices affected investor sentiment. Foreign and domestic institutional investors pulled back on their investment. Provisional buying, provided by stock exchanges, showed only marginally positive net buying from FIIs and DIIs.
 
The Nifty Midcap 100 index fell 1.5 per cent. The losses in the headline indices were relatively subdued as index heavyweights ICICI Bank, State Bank of India and Larsen & Toubro each fell over 2 per cent each. This was offset by gains in HDFC Bank and Tata Consulting Services.

 
“The benchmark indices are not reflecting the true picture but the mid-cap and small-cap stocks are under selling pressure,” said a head of research at a foreign brokerage.
 
On a year to date basis, the Smallcap 100 index is down 21 per cent, the Midcap 100 index has declined 13 per cent, while the Nifty50 has gained 1.3 per cent.
 
Among the major losers in the small-cap indices were high-debt companies, such as Jaiprakash Associates, Reliance Communications and Hindustan Construction.  Among the large stocks, the shares of three oil-marketing companies fell over 7 per cent each, after Brent crude futures rose above $76 per barrel. “A 4 per cent surge in crude prices and sharp depreciation in the rupee have cast a shadow on the markets,” said V K Sharma, head of private client group and capital markets strategy at HDFC Securities.
 
Experts say the markets might fall further. “Without any positive domestic triggers and uncertain global cues, some further correction or consolidation in the Indian markets cannot be ruled out,” said Jayant Manglik, president at Religare Broking.
 
“Small-cap and mid-cap stocks have seen hefty losses. Broad-based selling is being witnessed across the sectors except technology.”