On the other hand, small- and mid-cap stocks are languishing. Though the S&P BSE Small-Cap and Mid-Cap indices have rallied of late, these two categories have to still catch up significant ground to record fresh peaks.

At the current level of 16,947, the Small-cap index is 3,236 points south from its historic high of 20,183 recorded in January 2018. Similarly, at 16,563, the Mid-Cap index needs to gain 1,758 points to breach the previous summit of 18,321 registered in January 2018. This is an unusual situation. As small and mid caps are chased by retail investors at large, their portfolio is bleeding.

Interestingly, even the surge of the Sensex is driven by a handful of stocks. Reliance Industries, HDFC Bank, Kotak Mahindra Bank, Tata Consultancy Services and ITC are the main contributors to the rally.

Economic and company-specific headwinds probably outweigh the tailwinds. The Reserve Bank of India (RBI) increased interest rates twice, once in July 2018 and the latest in August 2018, by 0.25% on each occasion to nip inflation in the bud. The two upward revisions in a short span of couple of months come after a long lull of four years.

High interest rates can suffocate the already sluggish private investment. Even private consumption, the main driver of economic growth at present, can be hit. Bad debt continues to be a menace for the banking system. The close scrutiny of banks by regulatory agencies in the current environment of weak private investment is triggering extreme caution in fresh lending. The mood needs to change.

Investment in creation of assets is crucial for sustainable economic growth. A jobless economic growth, with companies focusing on cost-cutting to maintain or even boost profit, is not desirable. As it is the private sector is choosing to wait and watch the outcome of the 2019 Lok Sabha elections before committing serious money.

US President Donald Trump continues to disrupt the global order. Three large economies — the US, China and the European Union — are involved in a trade war. A truce has been negotiated with Europe on the imposition of import tariffs. The US and China will be holding talks. The outcome is uncertain but the move is cetainly welcome. According to the International Monetary Fund (IMF), the trade wars initiated by the US might inflict economic damage of US$ 430 billion on the global economy, or cut global growth 0.50%, by the calendar year (CY) 2020.

Brent crude oil prices remain at elevated levels at around US$ 71 per barrel. India meets 80-85% of its crude demand through imports. One of the fallouts is higher inflation. The rupee plunged to 70 a dollar in August 2018 with the collapse of Turkey's local currency lira on flight of foreign capital. The Indian currency might even depreciate further from the current level. The weakness will make Indian exports competitive. Unfortunately, India is an import-dependent rather than an export-orient economy. The country has a perpetual trade deficit. The fall in the value of the rupee against the US dollar means the current account deficit will widen: the import bill will be more than export earnings.

On the brighter side, India is in a position to drive global economic growth over the next three decades, as per the IMF's latest global economic update. The economy is expected to expand 7.3% in the current fiscal year ending March 2019 (FY 2019) and 7.5% in FY 2020, making India the fastest-growing economy in the world, ahead of China, with expected economic uptick of 6.6% in CY 2018 and 6.4% in CY 2019. India grew 6.7% in FY 2018 and is projected to gallop 7.1% in FY 2017.

The transition to the goods and services tax (GST) is almost over. GST rates have been reduced on several items including daily-use products and consumer durables in July 2018. The lower rates are expected to encourage demand.

A robust economy will benefit small and mid caps with lower base of revenues and profit. Owing to the challenging environment post global financial crisis of CY 2008, several small and mid cap stocks have focused on core businesses and strengthening of their balance sheets through reduction of debt. As a result, many of these two categories of stocks are in a better shape to withstand shocks. The recent correction has widened the basket for probable investment.

One of the important reasons for the surge witnessed by the stock market of late is the renewed interest shown by foreign portfolio investors (FPIs). FPIs turned net investors in equities in July 2018 after offloading from April to June 2018. The buying spree continues, with FPIs net investing Rs 1470 crore in the month till 9 August. For whole of CY 2018, FPIs have net invested Rs 3499 crore till 9 August 2018.

Mutual funds are far ahead, with net investment in equities of a whopping Rs 135273 crore in CY 2018 till 7 August 2018. Mutual funds have pumped significant amounts in each month of CY 2018. If the money flowing from mutual funds and FPIs continues abated, the Sensex can scale new peaks in the near term. In fact, the small- and mid-cap counters might even stage a quick and smart recovery to report historic peaks.

The weakness in small and mid caps or, for that matter, in select non-performing large-cap stocks can be seen as an opening to enter at the lower levels. Investors can scan companies based on industries, ratios (price-to-book value, price-to-earnings, dividend yields and return on equity), growth in revenues and profit, promoters and management (multinational companies and Indian companies with dispersed holding run by professionals) and capital expenditure plans.

There are many traditional ways of selecting equities in times of correction. One of the interesting methods is to match a benchmark price with the current market price. There are multiple price benchmarks that are available to investors. These include the buyback price, initial public offer (IPO) price, IPO opening price, prices at which shares are placed with qualified institutional buyers (QIBs), the price paid by strategic investors for equity stake, the price at which rights shares are offered, the average prices of bulk and block deals and open-offer price. The list should include issue of equity shares on preferential basis to promoters, strategic investors and financial investors.

The quantum of money involved in such transactions is high. Lot of efforts is undertaken before committing funds. Therefore, the price arrived at in such deals is an ideal reference point for the short to medium term. In fact, several investors refer to these price benchmarks while taking investment calls.

Capital Market shortlisted stocks that have lost a minimum of one-fifth in value compared with their recent benchmark prices. Correction in comparison provides comfort to investors as it offers a crystal clear yardstick for the short to medium term. However, solely relying on these prices to buy stocks that have corrected from these levels will not be foolproof. A thorough due diligence is necessary before taking the actual plunge. It includes checking the track record of the company, industry outlook and regulatory issues, if any.

The recently listed ICICI Securities offers investment banking, institutional broking, retail broking, private wealth management, and financial product distribution. The diversified set of clients includes companies, financial institutions, high net-worth individuals and retail investors. With headquarters in Mumbai, operations are spread to 75 cities, with a network of 200 branches and wholly owned indirect subsidiaries in Singapore and New York.

ICICI Securities Inc, the step-down wholly owned US subsidiary, is a member of the Financial Industry Regulatory Authority. Its activities include dealing in securities and corporate advisory services in the US.

Besides being the largest equity broker in India, ICICIdirect.com is also the second largest non-bank mutual fund distributor. Promoter ICICI Bank held 79.22% equity end June 2018.

NCL Industries, formally known as Nagarjuna Cement, derives 80% of the revenues from the cement business. Operations are mainly in south India, particularly in coastal Andhra Pradesh, with an installed capacity of two million tons. The remaining revenues come from segments such as cement bonded particle board, ready mix concrete and hydro power.

Cement is marketed under the brand Nagarjuna that is available in various grades of ordinary portland and pozzolana portland. In addition, special cement is made for supply to Indian Railways for concrete sleepers. Backward integration includes a cement-grade limestone mining lease for an area comprising over 210 hectares. The upcoming demand revival in south, increased thrust on low cost housing and infrastructure segments should benefit.

The product range of Tata Motors, a US$ 45-billion automobile maker, includes cars, utility vehicles, buses, trucks and defence vehicles. The country's largest manufacturer of commercial vehicles also has operations in the UK, South Korea, Thailand, South Africa, and Indonesia through a strong global network of 109 subsidiary and associate companies including Jaguar Land Rover (JLR) in the UK and Tata Daewoo in South Korea. Commercial and passenger vehicles are marketed in countries spread across Europe, Africa, the Middle East, South Asia, South East Asia, South America, Australia, CIS and Russia.

To improve performance in the domestic market, a Turnaround 2.0 strategy has been devised. Dedicated teams have been assigned for commercial and passenger vehicles. The poor performance of JLR is an immediate concern. Net debt increased to Rs 62436 crore end June 2018 compared with Rs 39977 crore end March 2018 on account of challenges faced by JLR and unfavorable working capital conditions at both Tata Motors and JLR.

Poddar Housing & Development has established presence in the affordable and value-for-money real estate housing segment. The focus is on Mumbai and surrounding areas over the past six years. The small cap has witnessed muted growth in the business over the last couple of years due to sluggishness in the real estate sector, delay in getting approvals for new projects and the conscious decision to delay launches to let the GST and the Real Estate Regulation and Development Act (Rera), 2016,-induced uncertainty to pass.

Two projects were launched in FY 2018 and more will follow in FY 2019. These projects are expected to create multi-year revenue and profit visibility. The plan is to launch five million square feet in aggregate in the next few years. Mutual funds held 13.8% stake end June 2018.

Private sector Federal Bank had 1,252 branches and 1,684 ATMs end June 2018. Total business grew 19.4% to reach Rs 205539 crore end June 2018 over a year ago. Total deposits increased 16.1% to Rs 111242 crore and advances 23.6% to Rs 94297 crore. The current-account-savings-account (Casa) deposits grew 16.2% to Rs 37234 crore. Casa as a percentage to total deposits stood at 33.5%.

The net interest margins were at 3.12%. Gross non-performing assets (NPAs) were at 3% and net NPAs at 1.72% of gross advances in Q1 of FY 2019. The tier I capital adequacy ratio was comfortable at 14.5% computed as per the Basel III guidelines. Mutual funds owned 22.83% equity end June 2018.

Natco Pharma is a unique pharmaceutical producer. The focus is on research and development (R&D) and complex molecules to get better prices in developed markets such as the US owing to limited competition. There is presence in multiple specialty therapeutic segments. The US bulk drug portfolio consists of 37 drug master files, with few more under development. The US product portfolio consists of 43 niche abbreviated new drug application (Anda) filings including 20 Para IV filings. Around 7% of the revenues is spent on R&D every year.

About Rs 915 crore raised through qualified institutional placement will be deployed for expansion of capacities and strengthening of the R&D efforts and the complex generics base. Capex will be Rs 400 crore in the current fiscal year. Of this, Rs 100 crore was incurred in Q1 FY 2019.

Care Ratings, earlier known as Credit Analysis and Research, was the second largest full services rating agency in India by rating income end FY 2018. The wide range on offer includes of rating and grading services across a diverse range of instruments. Clients comprise banks, financial institutions, private and public sector companies, sub-sovereign entities, small and medium enterprises and microfinance institutions. Issuer ratings and corporate governance ratings are offered.

Headquartered in Mumbai, there are branch offices in Ahmedabad, Bengaluru, Chandigarh, Chennai, Coimbatore, Hyderabad, Jaipur, Kolkata, New Delhi and Pune. There is presence in Africa and Nepal through subsidiaries.

Revenues and profit declined in Q1 of FY 2019 over a year ago owing to the sluggish debt market conditions and the resultant dip in business volumes. Total debt rated stood at Rs 3.81 lakh crore end June 2018 compared with Rs 3.89 lakh crore in the corresponding period in the previous year. Crisil, India's largest rating agency, controlled 8.9% stake end June 2018.

Ajanta Pharma has significant presence in the therapy segments of cardiology, ophthalmology, dermatology and pain management in India. The pan-India player has an army of 3,000 medical representatives. Operations in the emerging markets span 30 countries, primarily 19 in Africa. Over 350 products are offered across multiple therapeutic segments. Among the largest companies in Franco Africa recently made an entry into the US, with a product portfolio consisting of 19 Andas and 18 products on shelf.

India contributed 30% of the total revenues, with Africa institutions 19%, Africa branded generics 17%, rest of Asia 24%, US 9% and others 1% in FY 2018. The R&D expenditure was at 9% of net sales. Of the five facilities in India, two have received approval from the US Food and Drug Administration and the remaining are World Health Organization-Good Manufacturing Practice approved. A unit for manufacturing active pharmaceutical ingredients is mainly for captive use. The new unit at Guwahati in Assam started in January 2017, though the commissioning of the derma and ophthalmic sections is under implementation.

D B Corp is the country's largest print media publisher brings out six newspapers including Dainik Bhaskar (46 editions), Divya Bhaskar (nine editions) and Divya Marathi (six editions), with 220 sub-editions in four languages (Hindi, Gujarati, Marathi and English) across 12 states. Flagship newspaper Dainik Bhaskar in Hindi, established in 1958, Divya Bhaskar and Saurashtra Samachar in Gujarati and Divya Marathi in Marathi have a total readership of 5.9 crore. There is presence in Madhya Pradesh, Chhattisgarh, Rajasthan, Haryana, Punjab, Chandigarh, Himahal Pradesh, Delhi, Gujarat, Maharashtra, Bihar and Jharkhand.

Other business interests are radio, through the brand 94.3 MY FM, covering 30 cities in seven states. The digital business comprises nine portals and four mobile applications. There is no debt at the net level.

Somany Ceramics makes tiles, with capacity 55.29 million square meters or msm excluding outsourcing tie-ups, sanitary-ware 1.15 million units and bath fittings 0.65 million pieces. The outsourced tiles capacity, with no equity stake, stood at nine msm. Key owned plants of tiles are at Kassar in Haryana, with capacity of 19.63 msm, and at Kadi in Gujarat, with capacity of 6.65 msm.

The sales-mix comprises own manufacturing (40%), joint ventures (JVs) (41%) and others (19%). Total debt increased to Rs 541 crore, with a debt-to-equity ratio of 0.94 times, end March 2018 as against Rs 497.2 crore, with a debt-to-equity ratio of 0.78 times, a year ago. Mutual funds controlled 20.06% stake end June 2018 in the mid cap.

General Insurance Corporation of India is the largest reinsurer in the domestic market, leading many Indian companies' treaty programs and facultative placements. Though foreign reinsurers have opened branch operations in India since early CY 2017, market leadership is expected to be maintained in the near to medium term.

Internationally, there is partnership with the Afro-Asian region, with reinsurance of several insurance companies in Middle East and North Africa and Asia. Offices are located in London, Dubai and Kuala Lumpur, with a representative office in Moscow.

The diversified portfolio includes property, motor, agriculture, marine, engineering, aviation, health and liability to reduce risk. Reinsurance premiums are expected to touch Rs 70000 crore by CY 2022. Gross premiums were Rs 41799 crore in FY 2018 and Rs 33585 crore in FY 2017. The solvency ratio at 1.77 end June 2018 was above the minimum required ratio of 1.50. Total assets increased 15% to Rs 121748 crore end June 2018 over a year ago.

Tata Steel along with its subsidiaries is among the leading global steel manufacturers with an annual crude steel capacity of 27 million tonnes per annum end March 2018. Business operations are spread across 26 countries. There is commercial presence in over 50 countries. Among the lowest cost producer of steel in the domestic market owing to its integrated business operations has a highly leveraged balance sheet, with consolidated debt of Rs 92,147 crore and a debt-to-equity ratio 1.94 times end March 2018.

In a significant move to restructure the struggling European operations, Tata Steel signed a definitive agreement with Thyssenkrupp AG of Germany in June 2018 to form an equal JV. The JV will enable a strong and sustainable European business.

The acquisition process of Bhushan Steel under the Insolvency and Bankruptcy Code was successfully completed in the June 2018 quarter. The transaction structure provides close to 100% economic interest in the acquisition. Integration is underway and is expected to deliver synergies over the next 24 months.

Conclusion

The price benchmark is of little use if the investment horizon is short term. Though the average prices for bulk and block deals are available, it is difficult to determine whether these are benchmarks for buying or selling.

Profiles of investors, strategic and financial, involved in equity transactions are of great help as they provide the necessary confidence to small investors.

Benchmarks provide objectivity when undertaking stock-picking. Probably, this is the best part of the investment theme. However, there is no escaping from checks on the quality of management, track record of promoters, company financials, industry prospects, balance-sheet leverage and cash flow and profitability analysis.