Small cap index outperform Sensex in August

With small investors once gain returning to the market, the small-cap index was the best performer in August even outperforming the benchmark index Sensex, gaining around 13 per cent.

According to an analysis of the returns given by small capitalisation firms last month to investors, the BSE small cap index gave a positive return of 12.74 per cent, as it gained 791.2 points at 6,997.03 points during August, on the Bombay Stock Exchange.

"Small cap gave healthy returns because small investors have started coming back to market. So far, only large investors were benefited, as large cap and Sensex stocks gained," CNI Research CMD Kishor P Ostwal said.

Meanwhile, the 30-share index Sensex, which comprises blue-chip stocks, gave a marginal negative return of 0.02 per cent during the period under review and closing at 15,666.64 points on August 31.

"Since large caps are becoming expensive even for 2010 earnings, the scope of receiving investments from mutual funds will come towards mid-caps and eventually small caps," Ostwal added.

The mid-cap and small-cap indices track the performance of companies with smaller market capitalisation than the blue chip firms. Midcap index has also fared better than the Sensex and gave a positive return of nearly 6 per cent during the period under review, closing at 5,882.97 points last month.

Among the sectoral indices, realty index emerged as highest gainer and gave a return of 13 per cent in August.

Analysts said realty gained in August because real estate stocks were trading at lower levels, far from their earlier peak of January 2008, and giving better returns on hopes of future recovery.

"As the economy shows signs of revival there is expectation that real estate prices will stabilise and their will be an uptake in demand for realty. This expectation is driving demand for realty stocks," Ostwal said.

The sectoral indices which gave negative return in the reviewed month include, FMCG (down 6.74 per cent), Bankex down (1.43 per cent) and Metal (0.09 per cent).

Meanwhile, sectoral indices which gave positive returns includes Auto (2.87 per cent), Consumer Goods (4.40 per cent), Oil&Gas (3.10 per cent) and Power (0.72 per cent).

Marketmen said with close to Rs 60,000 crore added in August in assets under management (AUM) of mutual funds, the money would eventually come into the stock market.

Other indices which gave good returns include PSU (0.19 per cent), Healthcare (2.51 per cent), IT (5.31 per cent), Teck (4 per cent) and Consumer Durables (5.65 per cent).

Going forward analysts, expects the mid and small caps to outperform the markets and investors should pick up research based, quality mid and small caps to enhance their returns.