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Last Updated : Jun 28, 2017 08:10 AM IST | Source: Moneycontrol.com

Midcap mania dies out! 10 stocks which fell up to 30% in 29 sessions

The valuation of most of the midcaps was trading above their long-term averages and some consolidation cannot be ruled out, feared experts.


The S&P BSE Midcap Index slipped over 4 percent after hitting a record high of 15,122.77 on May 17, 2017 but many stocks corrected up to 30 percent since then. The S&P BSE Sensex rose marginally in the same period.

Midcap stocks, which led the fall, include names like Reliance Communications, Bank of India, Central Bank of India, IDBI Bank, Indian Bank, Adani Power, Union Bank of India, Torrent Power, Reliance Infrastructure, Wockhardt, and Reliance Power, according to Capitaline data.

These stocks caught investors’ attention since the time when Modi government came to power back in the year 2014. Midcap stocks saw huge PE expansion while nothing fundamental has changed on the ground which made most of them as risky.

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The valuation of most of the midcaps was trading above their long-term averages and some consolidation cannot be ruled out, feared experts.

The strong inflows seen in the MFs is also leading to a sharp outperformance of the small and midcaps over the large caps. Earlier this month, UBS in its latest report downgraded Indian market to neutral from overweight and cautioned on the midcap space.

Analysts were flagging caution in this space because earnings have not picked up yet and with goods & services tax (GST) which is about to get implemented by July 1st, the earnings recovery got pushed by another two-quarters.

“Traders who have been chasing hot money may have been caught at the top, and the prices are likely to be soft for a while. The fall and rise in midcap stocks are characteristic with the segment and the aspirations and fear associated with traders in the same,” Anand James, Chief Market Strategist- Geojit Financial Services told Moneycontrol.

“Additionally, VIX has begun to rise from historical low, so, investors should brace for some more volatility or corrections in the segment. But, there have been several late movers in this segment, so not all stocks are as vulnerable,” he said.

What should investors do?

Generally, mid-caps are high beta stocks i.e. they move up faster than the broader indices in a positive market and fall more than the index in a falling market.

“The current fall in mid-caps is something investors should have factored in while buying them. If one is holding a fundamentally good midcap stock then he need not worry as they would recover once the market settles,” Siddhartha Khemka – Head Equity Research (Wealth), Centrum Broking Limited told Moneycontrol.

“However, one should exit stocks which had moved up only in anticipation of improvement/turnaround or have high leverage / weak financials as they are unlikely to recover, in fact could continue to fall in such markets,” he said.

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First Published on Jun 28, 2017 08:10 am
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