Sensex at all-time high but not a happy year for many investors. Why?

According to stock market experts, retail investors mainly invests in mid-cap and small-cap stocks and current market rally is mainly driven by large-cap stocks. That’s why stock portfolio of retail investors are yet to recover the losses incurred after the sell off triggered by Russia-Ukraine war. They said that recent rally in markets is driven by those stocks that have underperformed in recent years and these stocks were either dropped or ignored by retail investors in recent sell off.

Highlighting upon the reasons for stock portfolio of retail investors not benefitting from recent rally, Vishal Wagh, Research Head at Bonanza Portfolio said, “This is a normal tendency of the market. Whenever mid-cap and small-cap segments underperform, retail portfolios fail to outperform. There is a handful of mid-cap and small-cap stocks, which are doing wonderful. But these are not in the portfolio due to their underperformance in the last couple of years. For example PSU basket defense stocks. Even, in any case, this kind of stock has booked out once they start gaining at the very initial stage. So, allocation is a major issue at this end.”

Bonanza Portfolio expert said that allocation is done on the basis of historical performance. As IT stock did well in the last rally, everyone is looking for bottom fishing in the sector but PSU is gaining momentum they are getting out from the portfolios as the historical performance is not that good. Many PSU stocks have given more than 50 per cent returns in the last couple of months.

Expecting catch-up rally ahead of the Union Budget 2023, Pravesh Gour, Senior Technical Analyst at Swastika Investmart said, “The overall outlook is bullish for the market, and there are no signs of a major correction, so we may see a catch-up rally in mid- and small-cap stocks in the coming days. Generally, FIIs’ flows in December remain tepid, and we saw stock-specific outperformance. We are heading towards the budget, and we can expect a pre-budget move in many pockets as this will be the last full-fledged budget of the Modi government before the 2024 general election.”

Rajesh Bhosale, Technical Analyst, Angel One said, “The rally was majorly driven by Banking space and front line counters as the geopolitical tensions were looming in the background and as the investors and traders preferred safe bets. But now the Nifty Mid-cap 100 is interestingly placed and with Nifty 50 about to mark new high we are seeing confidence back in investors / traders which is likely bring strong traction in this basket as well.”

On segments that may fuel buying interest in small-cap and mid-cap indices, Rajesh Bhosale of Angel One said, “Power and OMC showed strong momentum during the fag end of the week; these segments are likely to continue their momentum in the coming week. Traders can opt to trade in this segment on Intra-week dips.” 

On Friday, BSE Small-cap index finished at 29,201 levels, around 2100 points away from its all-time high of 31,304. BSE Mid-cap index ended at 25,595 mark, near 850 points away from its record high of 26,430 levels.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.