Mid-and small-cap indices lost ground on Friday, as investors booked profit in stocks of these two segments amid the Budget 2018 proposal to levy 10% long term capital gains tax (LTCG) on sale of equity investments. That apart, analysts also attribute the fall – especially in these two market segments – to the sharp run-up seen over the past one year.The S&P BSE Midcap and S&P BSE Small-cap indices lost up to 5% on BSE in intra-day trade on Friday. By comparison, the S&P BSE Sensex slipped 1.5% intra-day to 35,380 levels.
Thus far in financial year 2018 (FY18), the mid-and small-cap indices have outperformed the frontline benchmarks by rising 22.5% and 29.7%, respectively, as compared to 21.2% gain in the S&P BSE Sensex till Thursday.As many as 46 stocks from the small-cap index hit their respective 52-week lows on Friday. The lists includes Allahabad Bank, Dena Bank, Jubilant Industries, Indo Count Industries, Punjab National Bank, Ugar Sugar and United Bank of India.
“There are two parts to the fall seen today in the market. Broad market is reacting negatively to the excessive focus on rural and social schemes and the return of LTCG tax.
There is stock specific pressure due to un-winding of positions in high beta stocks. Market will take few days to absorb these proposals,” says Hemang Jani, Head Equity Sales & Advisory at Sharekhan.The fall has eroded investor wealth by about Rs 3.6 trillion on sharp fall in equity market. The total market capitalisation of BSE listed companies stood at Rs 149.52 trillion at 10:46 AM against at Rs 153.13 trillion on Thursday.Also Read: 2,706 BSE-listed companies to gain from cut in corporate tax rateThus far in calendar year 2018 (CY18), the midcap and smallcap indices are down 6% each, against 3.7% rise in the Sensex.“The sell-off has been primarily on account of the sharp run up seen in the mid-and small-cap stocks over the past few months. Going ahead, 2018 may turn out to be a year of individual stock pickings. We foresee a lot of fast churning happening in the mid cap space – that is, a large number of investors getting rid of over-valued or wrong stocks quickly even at much lower prices and then riding on good quality stocks,” explains G Chokkalingam, founder and managing director, Equinomics Research.business-standard