Analysts see small-caps bouncing back after massive August setback

In August, these stocks underperformed Sensex by 9 percentage points. Previously, they had seen sharper underperformance in Sept 2018

Analysts see smallcaps bouncing back after their worst relative showing in three years. In August, they underperformed the benchmark Sensex by 9 percentage points. Previously, they had seen sharper underperformance in September 2018. The underperformance comes amid a regulatory crackdown on so-called penny stocks. The smallcap-focused benchmarks saw intense selling pressure in the second week of August after BSE announced a new surveillance framework with add-on price bands for specified stocks to curb excessive speculative activity. Many stocks recovered lost ground after the impact of the measure was seen impacting only a handful of companies. “The Nifty small cap index is still 3 per cent away from its all-time high. We believe, the small cap index has formed a higher base above 50 days moving average and expect it witness catch up activity in coming weeks,” Dharmesh Shah, Head Technical, ICICI Direct in a note. In the first two sessions of this month, the smallcap index has outperformed the Sensex by 80 basis points.