MUMBAI: Fallen angel stocks — the ones that peaked during the boom, only to tank in the Sensex crash — are getting a new life as fund managers, who were under fire for being overcautious, look to deploy their idle cash in these so as not to be seen missing out on the current market rally.

On Monday, benchmark indices yet again failed to sustain at higher levels, but the rally in small- and mid-cap stocks continued unabated.

The 30-share Sensex hit a high of 14028 before slipping at 13913.22 at close, up 26 points, or 0.2%, over the previous close. The 50-share Nifty ended the day at 4237.55, barely changed over the previous close.
In comparison, the BSE Mid and Small-cap indices rose 3% and 5%, respectively.

“There is once again demand for stocks with a ‘story’ to them, as fund managers look for the next multi-baggers,” said a senior official at a domestic broking house. The story could be some medium-term development in the sector or the company that could boost the stock price over a 12-18 month period.

But brokers are worried by the fact that quite a few fund managers are again chasing stocks where managements have disappointed in the past.

This apart, there is also a surge in demand for stocks, where promoters were suspected of ramping the stock price in collusion with market operators.

Brokers say there are enough stocks which were beaten below their intrinsic valuations during the bear phase that began in January last year.

“Liquidity is always an issue in mid and small-cap stocks once a downtrend sets in; it is easy to buy big blocks in a rising market, but not as easy to get rid of them when the chips are down,” said another broker at an institutional broking house.

source: Economictimes

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