Small midcaps outperform in holiday-shortened week, 51 stocks rise 10-20%

Market Outlook

Small & midcaps outperformed in a holiday-shortened week with more than 50 stocks rallying over 10 percent in just three trading sessions, data from AceEquity showed.

Strong global cues, as well as record GST collections lifted market sentiment despite the rising COVID-19 cases across the globe, including India. Bulls managed to push Sensex back above 50,000 while Nifty50 also closed above 14,800 levels. Experts feel if Nifty falls towards 14,600, it should be used as a buying opportunity.

Global cues were positive led by US President Joe Biden’s announcement of a multi-trillion-dollar infrastructure investment plan. Foreign institutional investors were net sellers in the three trading sessions of the week gone by pulling out more than Rs 700 crore in the cash segment of the Indian equity markets.

The week gone by was a holiday-shortened one with March 29 and April 2 being public holidays for Holi and Good Friday, respectively.

The S&P BSE Sensex rose 2.08 percent while the Nifty50 gained 2.4 percent for the week ended April 1, compared to 2.7 percent rise in the S&P BSE Midcap index and about a 4 percent rally in the S&P BSE Smallcap index in the same period.

There are as many as 51 stocks in the S&P BSE Smallcap index which rose 10-20% in just three trading sessions. These include HEG, Saregama India, Jaiprakash Power Ventures, JSW Holdings, NIIT, Adani Transmission, Orchid Pharma, and Prakash Industries.

Weekly BSE 500 Midcap 0204_001

“Market sentiments were mainly guided by the infrastructure stimulus of $ 2.3 Trillion announced by U.S. President Joe Biden in the US. The treasury yields also witnessed some pullback which led to the movement in stocks,” Nirali Shah, Head of equity research at Samco Securities told Moneycontrol.

“Quality small and midcap stocks were a laggard for a few years pre-Covid and picked up steam only since markets switched towards value plays. Going forward too, there seems to be a lot of fuel left in them as some of them are still quality growth-oriented stocks which can undergo a rerating in terms of valuations,” she said.

On the sectoral front, buying was seen in metals, Utilities, healthcare as well as IT stocks. The S&P BSE Bankex closed with gains of about 2 percent.

“Rising global prices and increased domestic, as well as global demand, boosted metal stocks. Good auto monthly sales data led to a 1.6% gain for the Auto sector,” Siddhartha Khemka, Head – Retail Research, Motilal Oswal Financial Services Ltd told Moneycontrol.

“PSU Banks gained on the back of capital infusion from the government. JSW Steel, Hindalco, Tata Steel, Adani Ports, and IndusInd Bank were among top gainers on the Nifty, while losers included HUL, HDFC Life, Nestle, TCS and HDFC Bank,” he said.

Technical View:

Nifty closed above 14,800 levels for the week ended April 1 but the big resistance could be seen at 14,900-15,100 levels. The index has been forming higher lows from the last four trading sessions and managed to cross recent swing high which is boding well for the bulls.

The Nifty50 formed a Bullish candle with a long lower shadow indicating buying was seen on declines. The index has to hold above 14800 to witness an up move towards 15000-15100 levels.

“Nifty could gradually head towards 15,400 over the coming months while 14400 remains significant support. Use any declines as buying opportunity. In the coming week, we expect Nifty to resolve out of last week’s truncated price action and head for a target of 15,100,” Dharmesh Shah, Head – Technical, ICICI Securities told Moneycontrol.

“Sector-wise, IT, Pharma, financials, Infra and Consumption expected to outperform.  TCS, Adani Ports, Cipla, Bajaj Finserv, Tata Motors, Indusind Bank preferred in large caps while Graphite, Philips Carbon, Glenmark Pharma, KNR Constructions, JK Lakshmi Cement, V-Guard, Symphony, Persistent Systems, Tata Chemicals are expected to outperform in midcap space,” he said.

Technical experts feel that any dip towards 14,600 levels should be used as a buying opportunity. The focus should be on stocks in commodities, banks, and pharma space.

“The next level 14,600/ would be considered a significant support area. A positive move in global markets, a drop in bond yields, and a slight easing in the dollar index could help the Nifty to move beyond the 15,450 levels,” Shrikant Chouhan, Executive Vice President, Equity Technical Research at Kotak Securities told Moneycontrol.

“If the index slips below 14,600 then the index could retest 14,400-14250 levels. It was a truncated week for the market and FIIs turned net sellers to the tune of Rs 900 crore, however, domestic institutions infused more than Rs 4000 crore in the cash market,” he said.

Chouhan further added that the strategy should be to buy on dips with a stop loss at 14600/49300. The focus should be on commodities, Banks, and Pharma companies.

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