Technical view by Nooresh

Bloodbath in Midcaps – Difficult times – Capitulation

In the last couple of sessions we are seeing a lot of midcaps which were holding on are suddenly collapsing with no major announcement or news in the stock. Tough times for investors.


Some of the stocks are as below


Havells down 15%


tv 18 down 8% and is now down to 17 rs


NBCC is down 8% to 112 ------------ ( Will need to rework on this at sub 100 levels will be interesting )


Triveni Turbine down 5% to 51   ( this can be interesting at 40-45 bucks )


Orient Cements down to 35 bucks ( This seems interesting )


Geometric Software is down 20% after results


Vakrangee Software --- A risky company with LIC Stake mentioned yesterday is down on another 20% lower circuit


Vivimed Labs is down 10% and falling from 250 to 110 on lower circuits.


Plethico Pharma down on lower circuits


Innoventive Inds where IDFC mutual Fund bought a stake at 130 bucks is on lower circuit at 40.


BGR Energy is down to 80 after founder expired. Last OFS was at 118


Nilkamal Plastics is down 8% at 110 ……………. ( this is a stock i have recommended at 190-220 levels and facing a big hit)


Hanung Toys  - Another manipulated counter with debts at 10 times market cap as of today continues on lower circuit.


Navneet Publications down 5-7% with no reason


LIC Housing , BPCL, HPCL


Venus Remedies, TV Today , Sequent Specific, Lovable Lingerie and many others which are down 4-10% whereas the Nifty is down only a 1.2%


These are difficult times for investors. Some of the reasons could be .


-> Quite a lot of Managements are not trustworthy.


-> If the management is trustworthy the macro scenario is changing very fast.


-> The size of the companies are small and institutional investors have become totally anti-midcaps with the previous instances of bad managements.


-> There is absolutely No interest from retail and HNI so even if there is a company available at great value there will be a long gestation period till the macro changes and demand comes back.


-> Prices are a function of demand and supply. Current actions like PCAS and low liquidity otherwise also is a deterrent for any buyer and the demand is totally gone.


-> Majority of Indian companies are not keen to give big dividends which can reduce downsides. ( For example like NESCO but the company needs money so no dividends and so no re-rating of the stock )


-> At current levels many midcaps are terribly underprices but with no demand stock prices can continue to slide lower. Investors with a 1-3-5 years view will be rewarded but if you are looking at next 3 months be careful.


Some of the stocks which i liked and hold Smartlink has dropped from 548-55 levels to 43 today with low volumes. Available at 1/3rd the cash on books. Nucleus Software has added 100 crores to the cash in balance sheet in 2 years but stock at same price. The stock looks interesting at 60-70 bucks if one has a long term view. Am comfortable holding on to them for years to come.


We will discuss many such stocks which present value but the market price will be a function of demand supply which for now is not in favor.


Strategy -------------- If you have studied the company and are comfortable about the long term prospects and margin of safety there is nothing to worry and rather should look for buying at unexpected levels.

If you have a short term view and stuck into some unknown stocks and with no research or conviction keep a stoploss and exit.

At the same time Nifty and the benchmark may continue to show a different picture.



Disclosure: For the past few months we have just been waiting and watching for new investment picks ( nursing losses on older picks )  and still not convinced with the technical picture for midcap space but are seriously looking for big bargains to cover up.

Some stocks we are watching NBCC at 80-100 , NMDC at 70-80 , Smartlink , Nucleus, Orient Cements, Arvind Limited and many more. Although the view is clearly now changing to 1-3 years and be ready for even a 20-40% drop from entry prices so to accumulate only and no big purchases.

Most importantly to buy a chunk of your exposure only takes few minutes to execute so technically the right thing we believe is to wait for the prices to give the hint.


Technical Trades have been doing good with some shorts like Financial Technologies , Adani , ITC   and longs like Bharti Airtel, Tech Mahindra , Biocon and so on. The focus has shifted purely to the top 100-200 stocks for now even when we are bullish or bearish in the short term.



AUGUST 10-11

Can check a brief on the course outline


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Article by Nooresh Merani

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{ 2 comments… add one }
  • Ravi KUmar July 30, 2013, 20:10

    nice article nooresh. you have done a great job.

    • Nooresh August 1, 2013, 13:39

      THanks for your comment


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