For the first time in four years, the ratio of BSE Midcap index to Nifty has fallen below the trendline that provided support to the gauge.
That is because the recent under performance of mid-cap stocks has led to a sharp depreciation in the mid-cap index.
The BSE Midcap to Nifty 50 ratio now stands at 1.5.
The last time such a trend was broken was in November 2010. After that the Nifty corrected 6 percent in the following three months, whereas the BSE Midcap index depreciated 12 percent. The ratio of the two indices then converged around the current 10-year average of 1.28. The current ratio at 1.5 is still well above that average.
Also Read: Why Citi Prefers Large Caps Over Mid Caps