Small-cap, mid-cap stocks lose to blue-chips

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

Mumbai: The Bombay Stock Exchange (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 31 December 2010, to 30th November this year, the BSE Small-cap index dropped by 36.94% to settle at 6,097.26 as on 30th November. The Mid-cap index shed 27.87% to close at 5,627.69 in the trade ended 30th November.

Meanwhile, the BSE benchmark index Sensex saw an erosion of 21.38% to close at 16,123.46 on 30th November, from a peak of 20,509.09 on 31 December 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 24th November, 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 23rd November.

“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.

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Growth in credit to priority sector slows to 10% in October

The slowdown is on account of lower offtake by agriculture and MSME segments as well as decline in micro credit

Mumbai: Bank lending to the priority sector grew at a mere 10% in October this year, on an annual basis, on account of lower offtake by agriculture and MSME (micro, small and medium enterprise) segments as well as decline in micro credit, reports PTI.

Credit offtake by the priority sector had grown by 19.9% during the same month of 2010.

Credit disbursement to the priority sector stood at Rs12.48 lakh crore in October compared to Rs11.35 lakh crore in the same month last year, according to the Reserve Bank of India (RBI).

In October, bank disbursements to agriculture and allied activities went up by a mere 7.1% to Rs4.35 lakh crore. In October 2010 credit disbursement to the segment had gone up by 20.4% on an annual basis.

Similarly, growth in offtake by the MSME sector slowed to 17.4% at Rs4.73 lakh crore in October. Bank credit disbursement to the sector had increased by 20% in October last year.

As far as micro credit is concerned, the sector, in fact, witnessed a decline of 13.3% during the month under review to Rs24,601 crore. Micro credit had grown by over 50% in the same month last year.

Credit to the housing sector in October this year stood at Rs2.36 lakh crore, up a meagre 3.5% on an annual basis. The growth in credit to housing had stood at 9.3% in October 2010.

Bank credit disbursement to weaker sections grew by 13.3% to Rs2.20 lakh crore during the month under review.

Credit offtake by weaker sections from banks had risen at an annual rate of 27.7% in October last year.

While some priority sectors like agriculture and loans for weaker sections is disbursed at an interest rate lower than their prime lending rates, other segments do not fall under the subsidised lending regime.

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Finance ministry wants FDI in airlines within SEBI framework

 

While approving the draft Cabinet note on FDI in airlines, the finance ministry has suggested the DIPP consult SEBI on the issue as several airlines, including Kingfisher and Jet Airways are listed companies

New Delhi: The finance ministry is understood to have given the green signal to the proposal to allow 26% foreign direct investment (FDI) by foreign airlines in the private carriers, many of them facing a cash crunch, with a rider that such investments should not violate Securities and Exchange Board of India’s (SEBI) takeover code, reports PTI.

The Department of Industrial Policy and Promotion (DIPP) had proposed 26% FDI by foreign airlines into the domestic industry in the backdrop of Kingfisher Airlines slipping into a severe debt crisis and several others facing resource crunch.

While approving the draft Cabinet note on FDI in airlines, the finance ministry has suggested the DIPP consult SEBI on the issue as several airlines, including Kingfisher and Jet Airways are listed companies, sources said.

“We have asked DIPP to consult SEBI so that their regulations do not come in conflict with the Takeover Code,” a senior finance ministry official told PTI.

Under the SEBI’s Takeover Code, an open offer is triggered once an investor acquires 26% stake in a listed company.

The size of the open offer required is 25%, which would mean that the investor will have to buy additional equity from the public.

Several ministries, including the home ministry and the Planning Commission have already backed the proposal.

However, the aviation ministry is for fixing a cap of 24% on the FDI.

At present foreign investment up to 49% is permitted in the domestic airlines, but the foreign carriers are disallowed to make such strategic investments.

 

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