Small cap scrips back in favour as Sensex dips

The inverse relationship between the Sensex and small-cap indices came to the fore yet again on Friday.

While the Sensex slipped by 101 points, the BSE small cap index, which had gone down 5.94 per cent over the last seven days, rose 0.21 per cent.

The mid-cap index too, which was going down on four of the last six trading days, also moved up by 0.38 per cent on Friday.

"In a way, this can be a sign that retail investors are coming back after being scared off by the huge runs in the past," said a broker. He further added, "It is almost like they are more comfortable when the sensex is going down."

"There was heavy selling by FIIs on Friday," said Manoj Parmar, dealer at Pioneer Intermediaries, "and large caps declined because of this." This was in contrast to small and mid-caps, he added.

While the Sensex rose by 3.08 per cent from 9549.92 to 9843.87 during the last seven days till yesterday, the small-cap index fell by 5.94 per cent and mid-cap index by 1.11 per cent during the same period.

Till recently, small caps used to outperform the Sensex as they posted a return of 64 per cent against 48 per cent of Sensex over the last 10 months.

But last week's action clearly shows a trend reversal as small caps went down by 5.75 percent whereas sensex gained 2.02 per cent during the week, despite Friday's loss of over hundred points.

Analysts, however, warned of a bearish trend in the Sensex, which was likely to bear upon small-cap stocks as well.