BSE on June 4 decided to bring 109 companies including Reliance Naval and Engineering, Amtek Auto, GVK Power & Infrastructure under enhanced surveillance measures. "..100 percent margins shall be applicable with effect from June 6 on all open positions as on June 5, and new positions created from June 6, onwards," the exchange said in a circular.
The massive fall in the mid- and smallcap space has been enhanced after market regulator SEBI placed 109 companies under additional surveillance. Companies that are under vigil - Amtek Auto, Sunil Hitech Engineers, Rain Industries, HEG, Radico Khaitan, Venky’s (India), Graphite India, MIRC Electronics, GVK Power - have all plunged over 14 percent in June.
“The situation has been further compounded by BSE placing additional surveillance measure on numerous midcap stocks,” Abhishek Mondal of Guiness Securities said.
Leading stock exchange BSE on June 4 decided to bring 109 companies including Reliance Naval and Engineering, Amtek Auto, GVK Power & Infrastructure under enhanced surveillance measures. "..100 percent margins shall be applicable with effect from June 6 on all open positions as on June 5, and new positions created from June 6, onwards," the exchange said in a circular.
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Shortlisting of securities under the additional surveillance measure (ASM) framework is purely on account of market surveillance and should not be construed as an adverse action against the concerned fundamentals of a company. Among the 109 companies put under the ASM framework are: HEG, Bombay Dyeing & Manufacturing Company, Dilip Buildcon, GTL Infrastructure, Indiabulls Ventures, Jaypee Infratech, Radio Khaitan and Rain Industries. According to the BSE, the ASM framework will be in conjunction with all other prevailing surveillance measures being imposed by the exchange from time-to-time.
The MidCap Index has already fallen nearly 13 percent this year compared to a 2 percent gain in the benchmark Sensex. The Smallcap index is down nearly 19 percent in the same period.
Commenting on the same, VK Sharma, Head Private Client Group & Capital Market Strategy at HDFC Securities, said,
“The ongoing weakness in the mid- and smallcaps space is also a worry. Regulating actions on 109 stocks has resulted in panic withdrawal of funds from those stocks, leading to major correction in markets.”
The road ahead for mid and smallcap stocks is bumpy with analysts advising investors to stick to quality rather than quantity. “It will be better to book profits in some of these names and use the proceeds to buy into largecaps,” they stated.
“We retain our stance (put out in the beginning of the year) that returns in 2018 would be quite sober as against strong gains in 2017. Benchmark indices could remain in a consolidation phase,” Gaurav Dua, Head of Research, Sharekhan, said. He ended by cautioning that these stocks could continue to see pressure, especially in cases where last year’s rally was not backed by fundamentals.