Bank Nifty recovers; midcaps stocks to remain in pain

The fall that was seen in midcap and small cap stocks today was on the back of margin calls getting triggered. According to dealers, there is pressure in the midcap and small cap space as many traders and local market participants are giving up on individual holdings, reports CNBC-TV18's Nimesh Shah.

One way to describe this fall in the midcap and small cap is the kind of capitulation seen in particular broader market stocks. Some margin calls were triggered in some important stocks as well. Also Read: 5800 key for Nifty; some stocks may see pain: ICICI Direct
There are two ways of looking at the market. One from the Futures side, there is shorting in Bank Nifty. There is also some bit of short covering in Bank Nifty. So the Bank Nifty has actually recovered half a percent from the day’s low. It seems like there will be a bit of stability in Bank Nifty in today’s trade.
The cash market on the other hand is clearly selling their holdings, which shows the kind of retail pain that is there on the mutual funds side. Looking at the mutual fund data for the last couple of quarters, it is basically the oil and gas and pharma where they were overweight on and those stocks are getting sold into. This shows there is redemption pressure in insurance companies and mutual funds.
Net-net on the Nifty there may be a bit of support at these levels. If 5650 is breached, on the downside the next level may be 5500-5550. But going by the way things are at the moment, midcap pain may continue given the fact that the flows are very negative and margin calls are getting triggered for many of the influential not really high net worth individuals (HNIs) but some brokerages will.
So that pain is something which is not yet out of the system and one needs to be very careful, but for today’s trade it looks like there will be some bit of sanity in Bank Nifty and you are already seeing some bit of short covering in the Bank Nifty at least on the Futures side.