It was the 1st week of 2019 and things went south for the bulls. The S&P BSE Sensex broke below its crucial support at 36,000 and closed with losses of little over 1 percent for the week ended January 4.
The S&P BSE Small-cap index which fell by about 23 percent outperformed Sensex, Nifty as well as the S&P BSE mid-cap index. The index fell by 0.09 percent, compared to a 1.2 percent fall in the Nifty and 1.39 percent drop seen in the S&P BSE Mid-cap index.
Living to their name, big returns in small packets, small-cap stocks which were beaten down last year managed to buck the trend as 18 stocks gave 10-50 percent return in 5 trading sessions.
Stocks which gave double-digit returns include names like Kellton Tech, Atul Auto, Capital Trade, HCC, JSW Holdings, Nelco, Dwarikesh Sugar, and Adhunik Industries.
In terms of losers, as many as 9 stocks fell in double digits which include names like Tolta India, Jet Airways, Mcnally Bharat, Dena Bank, IL&FS Engineering etc. among others.
“Sense and sanity appear to be back in mid and small-cap space as their participation in recent times has improved on the back of positive chart formations,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.
“They can remain market performers and selectively few can outperform going forward. Hence, long-term investment can be considered in quality names from this space as worst appears to be over,” he said.
In the S&P BSE 500 index, there were hardly gainers. Quess Corp rose 13 percent while on the losing side, as many as four stocks fell in double digits which include names like Dena Bank (down 16%), Eicher Motors (down 12%), Future Retail (down 12%), and Jet Airways (down 11.2%).
The next week will be important for markets as the Nifty is trading near crucial support levels and most technical experts are advising clients to either remain stock specific or stay put and wait for a breakout above 10950 or breakdown below 10530-10500 before initiating fresh positions.
Macro data, earnings, GST meet, as well as US-China meet to iron out differences on the trade front is likely to dictate the trend for the market.
“A key trigger for the market will be GST meet and another round of cuts in tax rates on many of the items. It has been the point of discussion on the street and further may give some direction as it happens just a month before the Interim Budget,” Mustafa Nadeem, CEO, Epic Research told Moneycontrol.
“Not just that, we have TCS lined up with earnings along with Infosys, IndusInd Bank. So, all in all, a lot of big names will be driving the cues for its sector and will be watched critically. Post that Manufacturing numbers, Industrial production, and inflation,” he said.
In terms of technicals, the Nifty, in the first half of the session, attempted to drag the index down. On the way down, the index broke the lower end of the Ending Diagonal pattern.
In the lower territory, however, the bulls rushed in and threw the Nifty back into the pattern. Thus the pattern is yet to break down on a closing basis.
“The weekly chart shows that the Index has formed a multi-week distribution near the crucial weekly moving averages. Over there, the Nifty has formed an Engulfing Bear candlestick pattern for the last week,” Gaurav Ratnaparkhi, Senior Technical Analyst, Sharekhan by BNP Paribas told Moneycontrol.
“The weekly momentum indicator has nearly completed the pullback cycle. Thus the structure looks ripe for a fresh decline. One can initiate a fresh short position once Friday’s low of 10628 breaks,” he said.
Ratnaparkhi further added that the initial target area on the downside is at 10535-10530 i.e. the junction of the swing low & the daily lower Bollinger Band. On the flip side, 10750-10775 shall act as an immediate resistance zone, which can put a cap on the minor degree bounce.