Smaller Stocks Are Doing Better Than Sensex & Nifty, More Than 80 Rise By 10-30% In A Week
Bulls remaining in control pushed Sensex and Nifty above 50,000 and 15,000, respectively, except for the massive selloff on Friday. The selling was a direct result of exit poll results, delay in vaccination for the age group 18-45 and concerns over economic recovery if COVID situation escalates.
The smallcap index outperformed the benchmarks. According to the experts, the reason that the smallcap index is outperforming the benchmark indices could be that the smaller companies are reporting better earnings.
The S&P BSE Sensex gave up gains but still managed to close 1.8% higher for the week and the Nifty50 closed with profits of 2.02% for the week ended on April 30th, compared to the 1.8% rise in the S&P BSE Midcap index, and over 3% rally in the S&P BSE smallcap index.
Both Sensex and Nifty50 closed in the red on the monthly, while the S&P BSE Midcap index continued to rise 0.65%, and the S&P BSE Smallcap index closed with profits of about 5% for the month of April.
86 stocks in the S&P BSE Smallcap index rose by over 10%. These include Uflex, The Federal Bank, HT Media, Hindustan Copper, KPR Mills, HEG, Jindal Stainless, DB Realty, IDFC, Tinplate Company, Mastek, and Balaji Amines.
Strong earnings from IT heavyweights kept the Indian markets going in the past week. Globally, dovish US Fed, and positive global cues helped benchmark indices climb important resistance levels.
But, a rise in COVID patients may lead to further lockdowns across India and that could injure the earnings growth of India Inc.
Traditionally, large cap indices tend to outshine small and midcap indices during market correction since investors believe that big companies are a better place for safe return, but experts suggest that it looks like investors are chasing growth.
Sumeet Bagadia, Executive Director, Choice Broking told Moneycontrol, “This time things are very different, as the Nifty index has been trading down almost 800 points from its lifetime high, but the Nifty Small Cap index is trading at its lifetime high.”
“One reason could be that the medium and smaller companies have also been reporting better results than some of their large-cap counterparts, and this, in turn, is making institutional investors evaluate their potential in a new light,” he said.
Talking about sectos, metals that rose over 10% were bought in the past week, followed by energy as well as banking stocks.
Banking and metal stocks led the weekly rally backed by strong earnings. However, banking indices gave away its weekly profits due to the heavy selloffs towards the end of the week.
Vinod Nair, Head of Research at Geojit Financial Services said, “It was triggered by weak results announced by mid & small banks and NBFC like M&M Finance. Showing increased NPAs & provisions. Of source extended COVID situation is expected to further delay banks outlook.”
“In the week ahead, along with Q4 earnings results and updates on covid restrictions, state election results are also expected to influence the momentum. The market also awaits Manufacturing and Service PMI data for the month of April which is expected to be lower than the previous level,” he added.
The Nifty50 gave up gains after touching 15,000 on a day to day basis which suggests that there is some pressure at higher levels. Crucial support for the index is placed at 14,200 levels.
Foreign institutional investors turn net sellers by pulling out more than Rs. 12,000 crores from the cash segment of the Indian equity markets and Domestic Institutional investors bought more than Rs 11,000 crores.
According to Shrikant Chouhan, Executive Vice President (Equity Technical Research), Kotak Securities,“The market has exhibited a lot of fear on the screen before the outcome of the Elections. The news flow related to the quarterly result of the index giant Reliance Industries and rising coronavirus cases. The market entered into a short-term uptrend by crossing the level of 15000, but we saw a weekly closing far away from the highest levels. We feel it should act as a bullish continuation formation. Support would be 14600, 14500, and 14300.”