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Smart rally in smallcaps lifts battered portfolio stocks of this value investor

Historical data hints smallcap underperformance against BSE Sensex may be nearing an end.

, ETMarkets.com|
Updated: Mar 12, 2019, 04.09 PM IST
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The recent upside is a matter of relief for this investor as half of his portfolio stocks are still in the red year-to-date.
NEW DELHI: If you need more proof of the rebound in smallcaps, here goes one.

The ongoing pre-election rally in the smallcap space has given value investor Anil Kumar Goel reasons to smile -- it has lifted his battered portfolio stocks from their February lows.

Goel held over 1 per cent stake in about three dozen listed companies as of December 31.

Twenty-nine of Goel’s portfolio stocks -- for which the data are available -- delivered up to 46 per cent returns since February 18, the day the BSE Small cap index came close to hitting its 52-week low level.

The recent upside is a matter of relief for him as half of his portfolio stocks are still in the red year-to-date.

Shivam Autotech (up 47 per cent), Thirumalai Chemicals (46 per cent), Panama Petrochem (42.07 per cent), IG Petrochemicals (37 per cent), and Mazda (36.73 per cent) have jumped over 30 per cent since February 18. Srikalahasthi Pipes, Uttam Sugar Mills and Star Paper Mills, also part of his universe, have gone up over 30 per cent during the period.

A total of 24 of Goel’s portfolio stocks are up over 10 per cent since February lows while 16 are up over 20 per cent.

AKG snip

The BSE Smallcap index, by contrast, has jumped 8 per cent from February low of 13,784.78. It hit a 52-week low of 13,538.62 in October last year.

“What we saw over the last few days was a very quick rally in midcap and smallcap stocks, which was a bit overdue because the space was thrashed the most. We have had the most value erosion happening there. Can it sustain? To a large extent, it will depend on the liquidity situation,” Anand Tandon, Independent Analyst, told ETNow.

Tandon noted that we are entering the tax season, which has always been a tough time as far as adequate liquidity is concerned.

"I would be surprised to see if (the rally) continues, at least in terms of smaller companies. They were also partly supported by SIP inflows, which are showing signs of some fatigue ," he said.

Historical data, B&K Securities said, suggested that smallcap underperformance against the BSE Sensex may be nearing an end.

The ratio of BSE Smallcap and Sensex is near 1 standard deviation below its mean. Historically, the smallcap index does not fall much below the level.

Meanwhile, Goel’s portfolio stocks such as IG Petrochemicals, Sterling Tools, Star Paper Mills and Thirumalai Chemicals are still down 10-22 per cent year-to-date. In 2017, his scrips lost up to 73 per cent in value, data compiled from database AceEquity suggest.
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