INSUBCONTINENT EXCLUSIVE:
While it is close to four suburban railway stations and Gloria Church is a local landmark, finding an address in the lanes of this area can
be a nightmare for both pedestrians and GPS-armed taxis.
However, stockbroker and investor Chirag Parekh prefers to base his office in this
area instead of the upscale financial hubs of Mumbai
There is little traffic and ample parking space, says the director of Prarambh Securities, who had waded into securities trading because he
thought brokers could work shorter hours
indices are plunging, while the benchmark indices have closed at their all-time highs
Though Parekh is not worried sick, thanks to the comfort of his proprietary book, he now asks clients to invest in mutual funds, which have
access to better research, seen as the key to crack this puzzle
The West Bengal-based paediatrician in a government hospital has been investing in equities in the past one year
What is perplexing him is that his mid-cap portfolio has lost 15% in six months even as the flagship indices are soaring.
A six-month
comparative snapshot of the stock indices shows this divergence, which has the trading community puzzled
Between January 1 and now, the Nifty, the flagship index of the National Stock Exchange, has moved up 8%
On the other hand, the Nifty Midcap 50 has fallen 10% and the Nifty Smallcap 50 has declined 21%
This divergence between the largecap index and the mid and smallcap indices is a first in recent memory for Indian bourses.
Subhadip Nandy,
who trades stocks on the basis of quantitative analysis, pointed out this divergence a week ago through a series of tweets
smallcaps for the relative security of larger companies.
The meltdown has, however, left smaller investors in the lurch, unable or unwilling
The margins of leveraged day traders are under pressure
Only a few, like Parekh, are in a position to keep on investing at low prices.
Some investors like Mumbaibased communications professional
Ajay Aswani are seeing their financial strategies go awry, at least in the short term
Aswani, who is expecting a baby in October, has 80% of his investments in equities
Of this, 70% are in midcaps
He was planning to sell some of his equity holdings later this year to meet the expenses of the newborn
Now with his midcap portfolio down by 15%, Aswani is not keen to sell at a loss
He will have to find other investments to cash out.
The recent fall follows a build-up of epic proportions in small and midcaps in 2016 and
2017, when investors such as Addy pumped in money
After demonetisation, a lot of new money entered the equities market
Buoyed by the cash pile, many midcap shares have traded at 30-60 times their earnings over the past two years
Some prominent investors saw value in picking up certain mid and smallcap stocks
These investors also developed a large following
One such maven, Porinju Veliyath, whose portfolio management service handles Rs 1,500 crore, even suggested that investors can back midcap
companies with dicey corporate governance as these companies would eventually aim for better governance parameters, further improving the
intrinsic value of the scrips.
The buzz in stocks of small companies was widespread
management firm Julius Baer
In a market like this, which is ripe for a correction, there are several developments that can become a trigger for price correction,
Gumashta says.
And the triggers came tumbling
Some experts say macroeconomic issues such as rising crude oil price, fall in rupee and hardening interest rates were the reasons for the
Others blame a regulatory action of October 2017
The Securities and Exchange Bureau of India (Sebi) had ordered mutual fund houses to consolidate their schemes under five categories, in an
attempt to streamline the market for investors
The midcap space was clearly defined
This forced mutual funds to churn their portfolios, leading to a selloff in midcap stocks.
The Union Budget bringing in the long-term
capital gains tax on February 1, 2018, was also a dampener
In June, Sebi introduced additional surveillance measures on stocks.
There was bad news on the corporate governance front, too
Companies announced share buybacks but withdrew the offers after the prices of the scrips moved up
between 2016 and 2017 led to massive overpricing of stocks
Several of these corrected deep when macroeconomic indicators turned adverse
Prices are still ranging above historical averages
Fund.
Chennai-based Anil Kumar Goel, a widely followed value investor, says he has stopped trading
for a decade now, has also stopped trading
After investing in midcaps for three years, he has seen his portfolio dive 50%
Rajesh Baheti, president, Association of National Exchange Members of India, says many measures introduced by the regulator were more
focused on preventing tax evasion and less on market regulation
a small travel business in Mumbai, P Rajesh, had entered the equities market in search of excitement and extra money
But he is now keen to play with a straight bat
His basic needs are provided for through inheritance
About three years ago, he had taken an investing course from Motilal Oswal
With a little more than `4 crore, the proceeds of sale of a plot of land, he built a portfolio in equities
In the past six months, his portfolio has shrunk by Rs 80-90 lakh
But Verghese is willing to wait it out, though his family wants him to shift to fixed income instruments.
The wait is likely to be long
