Financial Daily from THE HINDU group of publications
Wednesday, May 25, 2005
Financial Daily from THE HINDU group of publications Wednesday, May 25, 2005 |
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Stock Markets Markets - Stock Markets Small-cap stocks sizzle, but analysts caution investors Virendra Verma
Mumbai , May 24 AFTER the run-up in mid-cap stocks earlier this year, it is the turn of small-cap stocks to witness a sharp rise in prices since April this year. During this period, large-cap stocks have remained almost flat. Brokers and analysts have cautioned about the unprecedented rise in the prices of small-cap stocks, as most of them in this category does not have strong financials. A look at the various stock indices of the BSE and the NSE shows that Small Cap Index of the BSE has gained 16.5 per cent since the beginning of April. During the same period, the BSE Mid Cap Index has increased by 5.94 per cent and the NSE's CNX Mid-Cap 200 is up 7.70 per cent. The BSE Sensex and the S&P CNX Nifty - the indices that include large cap stocks - have increased marginally. "People are lapping up investment ideas. Sheer liquidity is the main reason for the rise in stock prices," said Mr Sandeep Shenoy, Strategist at Pioneer Intermediaries, a stock broking firm. He said some companies (small-cap) are getting undesirable valuation, which is not seen in their financial strength. Mr Arun Kejriwal of KRIS Research said: "It is worrisome. It has already triggered alarm bells". "It is not investors dealing in such shares, but people who want to make a killing instantly". But Mr Shenoy said mid-cap stocks are getting good valuation. The sharp rise in the stock price is seen from the large number of stock doubling in just a month's time. Another interesting development is 322 stocks hitting the upper circuit on Monday when 2,500 stocks were traded on the BSE. Under upper circuit situation, there are only buyers and no sellers. Several players too feel that there is unexpected run-up in small-cap stocks and this kind of rally happens when the market is at its peak levels.
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