A volatile week for Indian markets where bears regained their control on D-Street and pushed Sensex below 50,000 while Nifty50 also closed below 14,900 levels but small & midcaps outperform.
The S&P BSE Sensex was down 0.8 percent while the Nifty50 fell 0.2 percent for the week ended April 9 compared to 1.2 percent rally seen in the S&P BSE Midcap index, and a 2.4 percent gain recorded in the S&P BSE Smallcap index.
Benchmark indices remained volatile despite a dovish policy from the Reserve Bank of India (RBI), but a rise in COVID-19 cases in India and across the world which increases the possibility of a lockdown, as well as a surge in Yields, acted as a sentiment dampener.
The real action is seen in the small & Midcap space despite some volatility seen in the benchmark indices. Small-Cap Index has hit new 52-week high and Mid-Cap is shy away from hitting a new all-time high — the real money-making opportunities are there where no one focuses, suggest experts.
As many as 50 stocks in the BSE 500 index rose 10-40% in 5 trading sessions that include names like Hindustan Zinc, CARE Ratings, Tata Metaliks, Info Edge, Jindal Stainless, PI Industries, Dr. Lal Pathlabs, and HEG, etc. among others.
“We are in Euphoria phase of the market where Mid-Cap and Small-Cap outperform by huge margins,” Brijesh Bhatia – Senior Research Analyst, Equitymaster told Moneycontrol.
“Remember an outperformance of Mid-Cap and Small-Cap index from 2014 to 2018, the similar structure is in place and investor should not miss the next couple of years of wealth creation from these stocks,” he said.
Sectorally, the action was seen in metals that rallied nearly 7 percent, followed by Healthcare that was up 5.5 percent, and IT index which was up 4.8 percent in a week while banks, capital goods, and realty stocks were laggards.
What to Watch out?
The coming week will be dominated by March quarter results from top IT names as well as macro data. The market will watch out for Industrial Production data for February, and Inflation data for March on 12 April, followed by WPI inflation for March on 14 April, and Balance of Trade Data for March om Thursday, 15 April.
In terms of results, top IT companies that will be declaring the results in the coming week include names like TCS (12 April), Infosys (14 April), MindTree, Wipro (15 April), and HDFC Bank (17 April).
“The market is expected to have a stock-centric rally in the coming days which has a very broad positive view. IT and Banking stocks will be in focus ahead of upcoming Q4 earnings,” Vinod Nair, Head of Research at Geojit Financial Services told Moneycontrol.
“Banking stocks will remain on the radar as the market awaits the impact of a Supreme Court judgment on banks asset quality and income recognition,” he said.
The broader markets outnumbered the benchmark with gains of 1-2% for the week. The Nifty recovered during the week to settle flat. The index formed a Doji-like pattern on the weekly scale.
The Nifty50 is likely to face still resistance around 14900-15000 levels while on the downside support is seen at 14,400, suggest experts.
“Our bottom-up index work projects Nifty to eventually resolve above 14900 in coming weeks and gradually head towards 15400 levels. In case of volatility downside remains cushioned around strong support of 14400 levels,” Dharmesh Shah, Head – Technical, ICICIdirect told Moneycontrol.
“The Nifty Mid and small-cap indices are expected to enhance their relative outperformance in tandem with their global peers. The outperformance of IT, Pharma, and Consumption to extend while downsides are expected to be limited in BFSI space,” he said.
Shah prefer TCS, L&T Infotech, Cipla, Divis Labs, Dabur, Titan in large caps while Infoedge, Matrimony, Indoco Remedies, Strides Pharma, Zydus Wellness, Amber Enterprises, IEX, Bajaj Electricals, Timken are expected to outperform in midcap space
Traders should wait for a breakout above 14900-15000 in the coming week before deploying fresh positions. The strategy should be to remain stocks specific. Technology and commodity-driven stocks which did well last week will continue to do well.
“Technology and Commodity stocks should do well based on their weekly performance. The strategy should be to hold long positions with a final stop loss at 14750/49350 or reduce weak long positions below the same,” Shrikant Chouhan, Executive Vice President, Equity Technical Research at Kotak Securities told Moneycontrol.
“During the week, FIIs turned net seller for 1700 crores in the cash segment. The dollar index came off from the highs but the Indian rupee also depreciated to the lowest levels of the last five months at 74.75 that could minimize inflows for our markets if the downward trend persists,” he said.
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