Nearly 100 smallcaps gain 10-50% as market posts better returns in 2 months

Despite a poor monsoon, a rising dollar, higher bond yields, and a surge in crude oil prices, the market posted better returns in the last two months on the back of positive weekly data points, while sustained buying by domestic institutions and the possibility of a pause in rate hikes by the US Federal Reserve added to the rally.

The Nifty50 rose 1.97 percent or 384.7 points this week to settle at 19,820, while the BSE Sensex rose 1.85 percent or 1,211.75 points to conclude at 66,598.91.

The broader indexes continued to excel this week, with the BSE Mid-cap index climbing 4%, the BSE Small-cap index growing 2.2 percent, and the BSE Large-cap index rising 2%.

"The domestic indices gradually rallied throughout the week, buoyed by strong macroeconomic data such as robust GDP and PMI figures, which painted a positive picture for the market." Despite a mixed global trend characterized by poor indications, Indian shares have remained resilient, bolstered by this strong economic outlook," said Vinod Nair, Head of Research at Geojit Financial Services.

Crude oil price increases, US unemployment claims statistics for August, disappointing Chinese service PMI and trade figures, and rising gas costs due to strikes in Australia stirred global alarm. However, despite their relatively high valuations, mid- and small-cap stocks drew substantial purchasing activity in the overall market. Furthermore, increased order inflows made sectors such as infrastructure and real estate particularly appealing to investors during the week.

"The market is now eagerly awaiting inflation and industrial production data to provide further guidance," he said.

All sectoral indices finished in the green, with the BSE Realty index and BSE Capital Goods index each up 5%, the BSE Energy index up 4.7 percent, and the BSE Power index up 4.7 percent.

The BSE Small-cap index increased by 2.2 percent. MMTC, GTL Infrastructure, National Peroxide, Cochin Shipyard, Bombay Burmah Trading Corporation, Magadh Sugar & Energy, GMR Power, SpiceJet, Vikas WSP, Ashapura Minechem, Transformers and Rectifiers India, and Sadhana Nitrochem all increased their stakes by 21 to 50 percent.

"Both the Nifty and the Sensex gained around 2% and outperformed the majority of global equity markets." Mid-cap and small-cap indices surpass the large-cap index. Macro emotions remained unpredictable as European and US bank flaws were highlighted. "Indian equity markets remain concerned about a slowdown in growth, higher interest rates, and valuation, even as inflation (particularly food inflation) remains elevated both globally and domestically," said Shrikant Chouhan, Head of equities Research (Retail), Kotak Securities.

"The majority of indices finished in the green. During the week, FPIs/FIIs were net sellers while DIIs were net buyers. GST collections for July (collected in August) were 10.8 percent higher year on year at Rs 1.59 trillion (June: Rs 1.65 trillion)."

US Treasury yields dipped on Friday as investors worried about the likelihood of additional interest rate hikes in the wake of new economic data. Initial weekly jobless claims were 216,000 on Thursday, less than the 230,000 forecast. The Eurozone's economy expanded by 0.1 percent in April-June compared to the previous three months, a lower rate than previously projected, and by 0.5 percent year on year after expanding by more than 1% last year. In Asia, China's exports decreased 8.8 percent year on year in August, while imports declined 7.3 percent," he noted.

This week, foreign institutional investors (FIIs) sold shares worth Rs 9,321.41 crore, while domestic institutional investors (DIIs) acquired shares worth Rs 4,572.14 crore.

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Where is Nifty50 headed?

Jatin Gedia – Technical Research Analyst at Sharekhan by BNP Paribas:

On the hourly chart, Nifty has reached the upper boundary of the ascending channel; consequently, a consolidation is likely to occur in the coming week. The likely range of consolidation is between 19850 and 19670. The daily and hourly momentum indicators have a positive crossover, which is a buy signal. Therefore, this is likely only a consolidation, and any dip should be viewed as a purchasing opportunity.

On the upside, we anticipate 19900, which is close to the swing high reached in July. In terms of price levels, 19630 – 19670 will serve as a crucial support zone, whereas 19860 – 19900 will serve as an immediate resistance zone.

Amol Athawale, Vice President - Technical Research, Kotak Securities:

After a promising reversal formation, the Nifty has maintained a higher bottom formation and is trading comfortably above the 50-day and 20-day SMA, which is largely bullish. In addition, it has formed a long bullish candle on weekly charts, which supports a continuation of the present uptrend.

For trend-following traders, the key support levels would be 19700 to 19650, and above those levels, the price could rise to 19900. Further gains could push the market to 20,000. In contrast, below 19650, the uptrend would be susceptible to a correction until the 50-day simple moving average or 19550-19500 levels.

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