Analysts see small-caps bouncing back after massive August setback

Analysts see smallcaps bouncing back after their worst relative showing in three years. In August, they underperformed the benchmark Sensex by 9 percentage points. Previously, they had seen sharper underperformance in September 2018. The underperformance comes amid a regulatory crackdown on so-called penny The smallcap-focused benchmarks saw intense selling pressure in the second week of August after BSE announced a new surveillance framework with add-on price bands for specified to curb excessive speculative activity. Many recovered lost ground after the impact of the measure was seen impacting only a handful of companies. “The Nifty small cap index is still 3 per cent away from its all-time high. We believe, the small cap index has formed a higher base above 50 days moving average and expect it witness catch up activity in coming weeks,” Dharmesh Shah, Head Technical, ICICI Direct in a note. In the first two sessions of this month, the smallcap index has outperformed the Sensex by 80 basis points.

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