Midcap, smallcap stocks rebound from CY18 lows. Analysts remain cautious

After tumbling 13 per cent and 14 per cent respectively when the frontline index, the S&P BSE Sensex, was at its peak level of 36,283 on January 29, 2018, the mid-and small-cap indices on the Bombay Stock Exchange (BSE) have staged a partial recovery.

Both indices moved up for the fourth straight session this week with a gain of 2.7% and 2.5% respectively, as compared to 1.4% rise in the S&P BSE Sensex. On a year-to-date basis, however, they still remain underperformers with a fall of eight per cent, as compared to less than one per cent fall in the S&P BSE Sensex.

“Market can dip further over the next few months, with a bulk of this fall coming from a correction in the mid-and small-cap segments. There are a lot of stocks where there is no valuation comfort, especially in the textiles and steel sectors. The public sector bank (PSB) fraud also hit sentiment. That apart, the pace of flows – both domestic and foreign – has slowed down a bit. All this will continue impacting the momentum going ahead,” says G Chokkalingam, founder and managing director at Equinomics Research.