The Bombay Stock Exchange’s (BSE) benchmark index, the Sensex, may have surpassed its previous high reached on 8 February to close at 14,664 points on Monday, but a majority of shares are still trading below the February level.
Since 8 February, when the Sensex closed at 14,652.09 points, 62.6% of the shares traded on BSE have fallen. More than 90% of these stocks are small-cap shares with a market capitalization of under Rs1,000 crore. This is based on data of the 2,549 commonly traded shares between 8 February and 2 July. Of these, 2,147 stocks have less than Rs1,000 crore in market cap. They have not joined the rally.
Surprisingly, this lack of breadth in the current rally is not reflected in the movement of BSE’s various market indices. In fact, the broader BSE 500 index as well as the BSE Mid-cap index and the BSE Small-cap index have risen at a rate higher than the Sensex. To get a better picture, one needs to look at all traded stocks and not a representative index.
Thus, while mid- and large-cap stocks have risen, shares with a market cap of less than Rs1,000 crore have fallen since February. Also, the degree of the fall increases with the decline in market value. Thus, stocks with a market cap of less than Rs100 crore have fallen the most—as much as 11.2%.
This gives the impression that many investors have lost money despite the Sensex regaining its peak. But it’s important to note that these stocks account for only 6.4% of the total market cap. A majority of investors’ wealth would thus be locked in other categories, which have risen in value.
At the same time, the performance of small-cap shares indicates retail interest in the market. Going by their performance in the past few months, it does look like retail interest is nowhere near the levels seen during earlier peaks such as in February 2007 and May 2006.