Mid-caps turn hot picks as bulls charge

AHMEDABAD: The party is on for mid-caps , but not without a word of caution from the experts. The market is likely to stay bullish for small and mid-caps. On Friday, upper circuit was applied to as many as 239 mid-caps and small-cap counters, out of 2,732 scrips traded on the Bombay Stock Exchange during the day.

For retail investors, those who have been staying off the markets of late, there may be an opportunity. Market experts say that small and mid-cap shares can give good returns in the short-term , if one is ready to take some risks.

A positive market breadth was seen after a long time on the BSE. As many as 1,551 shares closed in the positive territory . Only 1,108 closed in the negative zone. The BSE Mid-cap and Small Cap Index rose by 1.35% and 0.97%, respectively.
"There is a clear buying indication in the mid and small-cap segment. After a seven-month long erosion in the valuation of the scrips in the two segments, the prices are down by almost 60 to 70% from their all-time (January) highs. So, for smart investors, here's an opportunity for bargain-hunting ," says stock analyst Paresh Gordhandas.

He added that cash-rich traders can have a field day as retail investors are staying away from the market. The traders are looking at accumulating a good number of shares at their lowest prices. The frenzy to buy mid-cap and small-cap shares will continue till Diwali.

On Friday, B group shares witnessed highest number, 140, of circuit filters, while the upper circuit was applied to only two scrips in the A group.

However, all analysts are not so optimistic about the buying opportunity in the mid-caps segment. While they agree that there could be short-term gains, they recommend that investors better stay off.

Says Arpit Agrawal of Arihant Capital Markets: "All the negative factors are discounted right now and the market is likely to move up gradually. However, one should still go for large caps as their valuations are reasonably good.
There can be a sharp rise in the short-term , but the risk is equally large in the mid-cap segment."

"With every rise, there is a selling pressure in the market. So, one should stick to fundamentally strong stocks only. During the fall, retail investors should grab the opportunity , but focus should still be on the large-caps ," says Pawan Jain, chairman Ashika Stock Broking
Source : the economic times dt. 3 8 2008