The BSE MidCap index, which was ruling at 8,678 in November 2010, is trading down 30% at 5,995 as on Thursday.
The performance of the BSE small-cap index has been even more dismal with the index down 47% from the levels of 11,044 seen in November 2010.
The BSE Sensex, on the other hand, is just 1.3% below the levels touched in November 2010. The BSE Sensex posted its life-time high closing of 21,004.96 in November 2010.
On Thursday, the BSE benchmark closed at 20,752.43, 252.53 points shy of the life-time high.
In the current calendar year, Sensex has gained 6.7%, while mid- and small-cap indices have declined 15.7% and 20.7%, respectively. The BSE Small-Cap Index and BSE Mid-Cap Index have declined 30% and 14%, respectively, since the beginning of 2010, underperforming the benchmark 30-share BSE Sensex, which has gained more than 19% during the same period.
According to market experts, the current rally has been polarised, with the market depth being limited to just the top 150 scrips.
Foreign institutional investors (FIIs) are not putting their money beyond the large caps. The mid- and small-cap space are not drawing funds as the broad economic growth still remains weak, said Sonam Udasi, head (research), IDBI Capital.
In October so far, FIIs have put in $1.8 billion in Indian equities, taking their total year-to-date purchases to over $15 billion. In the September quarter, overseas investors had net bought $61 million in Indian shares.
Experts believe that high debt has been a major drag on the performance of the some of the mid-cap companies. Infrastructure and auto-ancillary are pulling down mid-cap space owing to debt burden, high borrowing costs and stalled projects, said Alex Mathews, head (research), BNP Paribas Financial Services.
Although broader indices have not supported the rally as they did in 2010, experts feel that the markets can still make new highs. If we continue to see sustained buying, Sensex can make new all-time high, Udasi added.
However, experts feel that mid- and small-cap stocks can be attractive from a long-term perspective. If the economy recovers as per expectation in the next 2-3 years, mid caps can even outperform large caps, said Mahesh Patil, co-CIO, Birla Sun Life AMC, during an interview with FE.
In the last five days, mid- and small-cap indices have gained 7% and 2%, respectively, outperforming Sensex which has gained 1.5%.
Money is now moving towards mid and small caps as can be seen in movement of various mid caps during the last few days, said Rakesh Tarwary, AVP (research), Motilal Oswal Securities.