Midcaps will hurt you more, Rs 1,00,000 crore already gone

Stock market corrections are always painful. It is more so in the middle and lower end of the market. Corrections are also considered part and parcel of a bull market. But wait! It’s not that simple for investors in midcap and smallcap stocks. Strong retail participation in recent times changed the contours of the domestic market in such a way that a major plunge the midcap stocks at this stage could leave investors high and dry, and how!

Midcaps being the playground for retail investors and domestic mutual funds, they have limited cushion in the case of a sharp fall, compared with their largecap peers, which can have a much bigger backup from overseas portfolio investors as well as big domestic institutions.

“If we leave out the $2 billion market-cap companies, total market-cap of midcap and smallcap stocks has risen to Rs 28,00,000 crore till last week, which was a historical high. In the event of even a small corr ..

One per cent of Rs 28 lakh crore equals Rs 28,000 crore, and a five per cent Rs 1,40,000 crore. This is much higher than the Rs 53,000-odd crore investment that mutual funds have made in equities in the first seven months of this calendar.

Monthly inflows to equities from domestic mutual funds have averaged at Rs 7,600 crore this calendar. Indian fund houses see around Rs 4,700 crore new investment in equity through the SIP route every month. That’s a good representation of retail p ..

Equity-oriented schemes account for 63 per cent of individual investors’ mutual fund assets, shows Amfi data. And a large chunk of this money remains invested in midcap stocks.

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