The BSE Small-Cap Index (up 34 per cent) and the BSE Mid-Cap Index (up 28 per cent) have outperformed the Sensex (up 16 per cent) in the last two-and-a-half months, while the NSE Junior Nifty (up 25.4 per cent) and the NSE Mid-Cap Index (up 30.2 per cent) have beaten the S&P CNX Nifty (up 20.4 per cent) during the same period.
The frenzied buying in small- and mid-cap stocks is also reflected in the turnover, which has gone up substantially during the period.
The small- and mid-cap stocks (non-A group), which accounted for 38 per cent share in the total turnover of BSE prior to October 2007, account for 53 per cent now.
On NSE, the share in turnover of small- and mid-cap stocks has increased from 49.3 per cent to 64.4 per cent in the same period.
According to Siddhartha Bhamre, a derivatives and equity analyst at Angel Broking, FIIs are inactive and not buying large-cap stocks on account of their stretched valuation and also because of many lucrative large-cap public offerings in the last three months.
Meanwhile, retail and high networth individuals (HNIs) are buying small- and mid-cap stocks instead of going in for large-cap stocks.
The retail and HNI investors are buying small-cap stocks such as those of Hotel Leela, Tata Teleservices and Ashok Leyland instead of going for Reliance Industries, Larsen & Toubro, Bharti or Reliance Communication. Traders and operators are buying and selling small- and mid-cap stocks on account of positive cost of carry for derivatives contracts.
Stock broker Shailesh Bhatia said FIIs had achieved the upper limit of investment in most of the large-cap stocks and hence could not buy more such stocks.
The retail participation was seen in momentum stocks, though not for delivery, but for intra-day selling, said Bhatia.
Stocks traded under the B group were the largest gainers on BSE. Their market share more than doubled from 3.27 per cent in October to 8.68 per cent in December. During the same period, the market share of the B1 group stocks increased from 29.30 per cent to 39.37 per cent.
The market price of 234 non-A group stocks went up by over 100 per cent in the last two-and-a-half months and the price of 559 stocks appreciated between 50 per cent and 100 per cent.
Of the 2,682 actively traded non-A group stocks, the daily average turnover of 53 per cent or 1,441 stocks more than doubled and the average of 235 stocks rose in the range 50 per cent to 100 per cent.
