Mumbai: The cream has clearly risen to the very top in the ongoing stocks portfolio churn, leaving a visible void below.Top indices with hefty overseas ownerships – the Nifty and the Sensex – have risen in lockstep with global equities to new summits, but the report cards of the back benchers aren’t so flattering. And many front-benchers aren’t smiling either.About 68 per cent, or 1,818 out of the 2,688 stocks in the active listed universe, are currently trading below their levels on January 31, 2018, the date from which long-term capital gain (LTCG) liabilities were grandfathered.The Nifty has rallied 36 per cent since January 31, 2018, while Nifty Midcap 100 gained 16 per cent. But the Nifty Smallcap 100 index is still down 4 per cent from January 2018. Large-cap stocks like ITC, Maruti Suzuki, NTPC are down 25 per cent since that date, while ONGC, Indian Oil, Coal India, IndusInd Bank are trading more than 40 per cent lower.81502600“From the broader market perspective, the markets seem to be connected with the ground reality with India’s GDP decelerating for the last three years along with corporate earnings,” said Gautam Duggad, head of research, Motilal Oswal Financial Services. “Mid and small-cap stocks tend to underperform when the economy slows down.”The Indian economy slowed for eight quarters except for a small rise between December 2018 and March 2019. GDP growth fell from 8.2 per cent in March 2018 to 3.1 per cent in March 2020. India posted 0.4 per cent growth in the December 2020 quarter after reporting de-growths of 24 per cent and 7.5 per cent in the quarters ended June and September.“Constant economic and technology disruptions have impacted small-cap and lower mid-cap companies and most of them found it difficult to withstand the competition from larger peers” said Deepak Jasani, head of retail research, HDFC Securities. “Sebi re-classification of large-cap, mid-cap and small-cap stocks for mutual funds and selling reported thereafter is also one of the reasons for many small and midcap stocks to underperform in the last three years.”RBI Governor Shaktikanta Das has recently warned that stretched valuations of financial assets pose a risk to stability and that there is a disconnect between booming markets and economic activity.The 1,818 stocks that are currently trading below 31 January 2018 price commanded 44 per cent of the total market capitalisation or Rs 62 lakh crore on 31 January 2018. However, their market share has now reduced to 22 per cent.Most of the PSU banks and companies including BHEL, New India Assurance, General Insurance, NBCC, Engineers India and others such as Sun TV, RBL Bank, Finolex Cables, Rain Industries, KRBL, Bajaj Consumer, Raymond, Deepak Fertilisers, VRL Logistics and Healthcare Global have also declined more than 40 per cent since January 2018.According to Gaurav Dua, head capital market strategy of Sharekhan, smaller businesses have been hit the most during the pandemic while access to finance is a big challenge.