As 2013 draws to a close, stock markets managed to record handsome gains driven by large blue-chips, but small and mid-cap stocks seem to be living up to their nomenclature with huge losses of up to 16 per cent.
The market benchmark appears set to end 2013 on a positive note with a modest gain of over 7 per cent, but such gains are not to be seen in a majority of stocks available in the market, which predominantly include those of mid-size and smaller companies, shows an analysis of various indices.
With just about a week-long trading left in 2013, the BSE's mid-cap and small-cap indices have fallen by about 10 per cent and 16 per cent, respectively, so far this year.
The slump in these two segments is in sharp contrast to their stellar performances last year, when they gave much better returns of up to 40 per cent. The gains registered by the blue-chip benchmark index BSE Sensex was much lower at about 25 per cent during 2012.
Analysts say that mid-caps and small-caps have under-performed their large-cap peers primarily due to low participation from investors.
Buying appetite is missing in small and mid-cap stocks and large-caps are more in favour since they are in the trading portfolio of most of the funds, they added.
"The reason why the performance of small-cap and mid-cap stocks have not been up to the mark is that retail participation in the markets have been poor. Little stock related movement have been witnessed in small-caps and mid-caps this year," Augment Financial Services' Founder and CEO Gajendra Nagpal said.
Marketmen said retail investors have large exposure to mid-cap and small-cap stocks and in the last few months the retail segment activity has dropped significantly. When things become worse, fears make investors exit these stocks at the lowest valuations, they noted.
"This year the volatility in the overall Nifty-50 stocks was very huge. Also, earnings for the small-caps and mid-caps have fallen in general on account of high interest scenario and fall in GDP. In comparison, earnings growth was very high in the large-cap and Nifty-50 stocks and they provided descent returns," said Yogesh Nagaonkar, VP-Institutional Equities, Bonanza Portfolio Limited.
The fall in smaller stocks were largely due to steep decline in the rupee and higher balance sheet stress, an expert said.
Mid-cap and small-cap stocks are generally looked at by local