Spooked by Yellen, Mid­caps Go Down­hill

The Economic Times - - Money -

Mumbai: Mid- and small-cap shares led the sell-off on Dalal Street on Wed­nes­day af­ter US Federal Re­serve chief Janet Yellen’s averred last night that rate in­creases are on track. Also, dis­ap­point­ing quar­terly re­sults from Tata Mo­tors and Sun Pharma turned the sen­ti­ment neg­a­tive. In­dian shares un­der­per­formed their Asian peers with bench­mark in­dices fall­ing about 0.7% on Wed­nes­day. The Sen­sex dropped 183.75 points, or 0.65%, to close at 28,155.56. The Nifty de­clined 67.60 points, or 0.77%, to end at 8,724.70. The mid-cap in­dex dropped 1.2% and the small-cap in­dex de­clined 1.5% as ner­vous re­tail in­vestors booked prof­its amid con­cerns that share val­u­a­tions were stretched.

“The sell­ing was in­tense in the mid and small­cap space as many of them are richly val­ued fol­low­ing a sharp rally in them since the be­gin­ning of the year,” said A K Prab­hakar, head of re­search, IDBI Cap­i­tal.

How­ever, fund man­agers said mid­cap stocks could re­bound sharper once sen­ti­ment im­proves.

“There are al­ways op­por­tu­ni­ties to choose within mid-caps where val­u­a­tions are at­trac­tive,” Dhi­raj Sachdev, se­nior fund man­ager at HSBC Global As­set Man­age­ment. “Within mid-caps, we like agrochem, spe­cialty chem­i­cals, gold mort­gage fi­nance and home tex­tile com­pa­nies”.

Yellen said on Tues­day the Federal Re­serve in­tends to raise rates three times this year and pos­si­bly even in the up­com­ing meet­ing in March, send­ing the dol­lar soar­ing and spark­ing a sell-off in bonds there.

At home, for­eign in­vestors’ re­ac­tion to the pos­si­bil­ity of US rate in­crease was that of in­dif­fer­ence. For­eign port­fo­lio in­vestors bought shares worth Rs 225.84 crore, while do­mes­tic in­sti­tu­tions too bought to the tune of Rs 248.98 crore.

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