INSUBCONTINENT EXCLUSIVE:
Mutual funds reclassifications, rising crude oil prices and a falling rupee have taken toll on mid- and small-cap stocks
More than 500 stocks have corrected between 30 per cent and 70 per cent since their highs in January.
The BSE mid- and small-cap indices
head-advisory, Sharekhan.
In October last year, the regulator issued a circular directing mutual funds to group their equity schemes under
large, mid and small caps based on market capitalisation of the stocks the scheme has invested
For instance, a large-cap scheme should have minimum 80 per cent investment in large caps and a mid-cap fund should have at least 65 per
cent of its assets in mid caps
This led to mutual funds churning their portfolio, resulting in several mid-cap stocks exiting the portfolio.
Some fund houses have begun
this exercise to comply with regulatory requirements
For example, Reliance Mutual Fund will merge Reliance Focused Large Cap Fund with Reliance Mid Small Cap Fund
After the merger, the name of the Reliance Mid Small Cap Fund will get changed to Reliance Focused Equity Fund
DSP Blackrock Microcap Fund will now be called DSP Blackrock Small Cap Fund.
Rich valuations have also triggered the correction, said
the small-cap index is at 100 times
Fund managers said these valuations are not sustainable in a difficult macro environment.
Midcap stocks like Birla Corp, Delta Corp, Power
Finance Corporation, Reliance Capital, Bharat Electronics, Capital First, Ajanta Pharma and TTK Prestige among others have declined between
