Increased surveillance by Sebi, stock exchanges ruins microcap party

Nearly two-thirds of sector stocks have underperformed smallcap index so far this year

An upward-trending market, heightened retail participation, and ample liquidity provide fertile ground for stocks in the micro- and small-cap universe to rally. However, increased surveillance measures undertaken by stock exchanges and the capital markets regulator Securities and Exchange Board of India (Sebi) have helped keep sentiment in check and limit excessive speculative activity, according to market observers.

At the start of the year, the micro-cap universe — stocks with a market capitalisation (m-cap) of less than Rs 500 crore — comprised nearly 1,750 stocks. Nearly two-thirds of them have underperformed the small-cap index so far this year.

While the average