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Last Updated : Jul 06, 2019 10:45 AM IST | Source: Moneycontrol.com

Small & Midcap stocks take a hit post-Budget 2019, 23 stocks fell 10-30% in five days

The S&P BSE Midcap index fell 0.56 percent while the S&P BSE Smallcap index was down 0.69 percent for the week ended July 5, compared to 0.20 percent rise in the Nifty50, and about 0.30 percent gain in the Sensex in the same period.


Indian markets witnessed a knee-jerk reaction post-Budget 2019 on July 5 and wiped out most of the gains made in the week. It closed marginally in the green for the week ended July 5.

The budget failed to live up to the expectations of the market although it has all the ingredients of providing an inclusive growth. The broader market faces the brunt as both small & midcap indices closed in the red.

The S&P BSE Midcap index fell 0.56 percent while the S&P BSE Smallcap index was down 0.69 percent for the week ended July 5, compared to 0.20 percent rise in the Nifty50, and about 0.30 percent gain in the Sensex in the same period.

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As many as 23 stocks fell 10-30 percent in just five sessions in the S&P BSE Smallcap index which include names like Atlanta, Eros International, KRBL, Nitin Fire, McLeod Russel, Cox & Kings, MT Educare etc. among others.

In the S&P BSE 500 index as many as 7 stocks lost 10-20 percent which includes names like PC Jeweller, CG Power, Eveready Industries, Thomas Cook, Yes Bank, Quess Corp, etc. among others.

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What led to the fall in markets

The focus of the government shifted to boosting the long-term growth of Asia’s third-largest economy which hit a slow patch in the March quarter. This can only be done by changing the levers of industries.

Even though some of the reforms proposed by the finance minister will benefit the economy, the absence of any strong stimulus, as well as structural reforms, could weigh on sentiment in the short-term.

“Since the government came with a strong mandate the expectation of structural reforms, being built in the market was probably on the higher side,” George Heber Joseph, CEO & CIO - ITI Asset Management Ltd, told Moneycontrol.

“A lot of expectations were built before the budget. The market was expecting some of the structural reforms in the budget like 1) Improving the governance in PSU Banks 2) Big push on infrastructure spending 3) Steps to streamline the NBFC issues 4) Rural & SME stimulus. While the budget tried to address many of these issues in some manner, the proposals probably did not meet market expectations,” he said.

Joseph further said that, in addition to that, increasing the public shareholding in listed companies to 35 percent, along with an increase in direct taxation at the higher income bracket and the increased taxation on Auto fuels, spooked the market sentiment.

Technical View:

The benchmark index witnessed profit booking after the Union Budget on July 5 as it gave up most of its weekly gains to close marginally higher by 0.2 percent at 11,811 levels.

The weekly price action resulted in a small bear candle with a long upper shadow, signalling profit booking near the upper band of the last six weeks consolidation which is placed around 12,000.

However, the larger price structure has not deteriorated. Therefore, one should not panic at current levels as going forward, suggest experts.

“We expect index to extend the last six weeks consolidation in the broad range of 12000-11600. Stock specific activity will be in focus in the coming week as participants will react to Budget fine print and onset of Q1FY20 earnings season,” Dharmesh Shah, Head – Technical, ICICIdirect, told Moneycontrol.

“We believe the Nifty has undergone healthy consolidation by oscillating in the broader range of 12,000-11,600 post exit poll session, helping the index to form a strong base around 11600 levels,” he said.

Disclaimer: The views and investment tips expressed by investment expert on Moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
First Published on Jul 6, 2019 10:45 am
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