MID, SMALLCAPS FALL EVEN AS MARKETS END AT RECORD HIGH

MUMBAI: Mid and small cap stocks fell sharply on Thursday even as benchmark indices ended on a record high. The Sensex gained 425 points during the day before closing at 35260.29, up 178.47 points or 0.51%. The National Stock Exchange’s Nifty ended at 10,817, up 28.45 or 0.26%.

Banking stocks led the rally on hopes the government may allow 100% foreign direct investment in private banks. Among banking stocks, HDFC Bank (up 2.1%), Kotak Mahindra Bank (up 1.7%) and IndusInd Bank (up 1.3%) were the top gainers.

But the rally in early trade fizzled out during the day. Repeated days of record peaks prompted some investors to book profits as December quarter earnings are yet to show a clear positive trend.

“Increase in FDI limits, if made, will be an incremental positive for private banks, specifically ones with stronger balance sheet and profitability. But given substantial gap even in current FII (foreign institutional investor) shareholding and maximum limit, we expect the impact to be marginal in magnitude,” said brokerage firm Jefferies India in a Wednesday note.

Currently, the government allows an aggregate foreign investment in private banks up to 74% of paid up share capital. The limit is capped at 20% for stateowned banks.

BSE Midcap and BSE Smallcap slipped 1.69% and 2.04% respectively as investors became concerned about rising valuations.

“There’s a froth building up in a few mid and smallcap stocks which is leading to profit booking,” said Gaurang Shah, head investment strategist at Geojit Financial Services Ltd.