The Hindu Business Line : Thanks to bull run, 161 cos move from small to mid-cap segment

THE spectacular rise of the stock markets in 2005 has witnessed the graduation of 161 companies from small-cap (market capitalisation below Rs 100 crore) to mid-cap segment (from Rs 100 crore to Rs 1,000 crore) and 81 companies from mid-cap to large-cap category (Rs 1,000 crore and above).

An analysis on 2,262 listed companies showed that their total market capitalisation registered a 38 per cent increase from January 3 to December 26, from Rs 1,937,875 crore to Rs 2,680,957 crore, thanks to the booming stock prices during the year.

"The graduation from small-caps to mid-caps and mid-caps to large-caps will continue in 2006," Mr Sriram Iyer, Executive Vice-President, Edelweiss Capital, who did the analysis, told Business Line.

The number of small-caps stood at 1,545 companies as on January 2004, which declined by 10 per cent to 1,384 companies by December 26, 2005, after the market cap of 161 companies within this segment rose above the Rs 100 crore-mark. In terms of market capitalisation of the small caps, it fell by four per cent to Rs 35,169 crore as on December 26, 2005, from Rs 36,636 crore on January 3, 2005. The decline is due to the graduation of 161 companies from small-cap to the mid-cap universe.

Similarly, the number of mid-caps increased from 519 companies at the start of the year to 599 companies on December 26, 2005, an increase of 15 per cent. The mid-cap constituted 23 per cent of the 2,262 companies in January, which grew to 26 per cent in December, Mr Iyer said.

Similarly, market capitalisation of mid-cap stocks rose by 14 per cent to Rs 2,02,204 crore on December 26, from Rs 1,76,688 crore at the start of the year.

The large-cap universe had been the biggest benefactor in the last 12 months. The number of companies in the large cap segment rose from 198 in January to 279 companies by December 26. Simply put, there are 279 companies, where the market capitalisation is over Rs 1,000-crore mark, compared to 198 such companies at the start of the year.

In terms of market capitalisation, there has been a 42 per cent growth in the large cap stocks. From Rs 1,724,551 crore in January, market capitalisation of the large cap universe touched Rs 2,443,584 crore in December.

In terms of business execution, the coming year will be crucial for the small-cap and mid-caps, which rely on the retail spending for growth, Mr Iyer said, adding that the market will watch how these companies (in businesses such as multiplexes, low-cost airlines, alcoholic beverages etc) consolidate their businesses.

The 2006-07 earnings numbers will also be key to their performance on the markets, Mr Iyer said.