Small stocks beat large caps in 2015

During the current calendar, the benchmark Sensex is down 6.05 per cent and the broader 50-share NSE Nifty has dropped 4.90 per cent. As against this, the BSE small cap index has rallied higher by 7.69 per cent while the BSE mid cap index has gained 9.51 per cent.

The high concentration of foreign ownership in large cap stocks has been cited as one of the main reason for their dismal performance in 2015. In this year till date, FPIs have made a net investment of Rs 16,673.78 crore in domestic equities. However, they remained heavy sellers during four out of the last five months, which according to market experts had an impact on the performance of large cap stocks.

While they sold Rs 16,877.27 crores worth of equities in August, Rs 6,475.15 crore and Rs 7,073.98 crore worth of equities were offloaded in the month of September and November respectively. In the current month, they are net sellers to the tune of Rs 3,949.02 crore.

“Large cap stocks had a significantly higher foreign ownership due to which stock prices remained subdued amidst heavy selling by FPIs. As compared to this, the small and mid cap stocks got continuous support in the form of fresh investments made by domestic investors especially the retail and high net-worth investors. The year 2015 has been the year of small and mid cap stocks and the trend is expected to continue in the near term,” said Ambareesh Baliga, a senior research analyst.

According to him, a decent amount of money garnered by equity mutual fund schemes have flown into quality small and mid cap stocks. The domestic mutual funds have bought equities worth Rs 64,000 crore in this year, their highest in the recent past.

The equity mutual fund schemes focussed on the small and mid cap segment have emerged as the best performing funds this year. The equity small cap funds have given an average return of 13.07 per cent while the equity mid cap schemes have given a return of 9.13 per cent.