Small-, mid-cap lose to blue-chips in 2011

The BSE small-cap and mid-cap indices have underperformed their large-cap peer this year so far, as the two saw a decline of up to 37% against 21% fall in the broader market benchmark Sensex.

As per the study of indices from December 31, 2010, to November 30, the BSE small-cap index dropped by 36.94% to settle at 6,097.26 as on November 30. The mid-cap index shed 27.87% to close at 5,627.69 in the trade ended November 30.

Meanwhile, the BSE benchmark index Sensex saw an erosion of 21.38% to close at 16,123.46 on November 30, from a peak of 20,509.09 on December 31, 2010.

Analysts said that mid-caps and small-caps have underperformed their large-cap peers primarily due to concerns such as high borrowing costs, currency fluctuations and low participation from investors.

In case of a slide in the market, these are the scrips which go down faster than the frontline stocks, experts said.

During the period under review, the BSE mid-cap index fell to one-year low of 5,459.92 on November 24, while the small-cap index skidded to its 52-week low of 5,914.55 on the same day this year.

The Sensex had tanked to its one-year low of 15,478.69 on November 23.

"In a bear market investors tend to invest in large cap stocks, while for smaller stocks they prefer to book profits. During the times of uncertainty one witnesses greater losses in mid and small cap counters. But when markets rally, these stocks move ahead of the frontline stocks," Geojit BNP research head Alex Matthews said.

Marketmen also said that retail investors have large exposure in mid-cap and small-cap stocks and since last few months the retail segment activity in the market has dropped significantly. When things become worse, fears makes investors exit these stocks at lowest valuations.

The mid-cap and small-cap indices track the performance of companies with market capitalisations that are a fifth or a tenth of that of blue-chip firms.