Broader indices underperform but 20 small caps gain 10-29%

Market This Week

Broader indices' mixed performance continued in the second week and underperformed the main indices in the volatile week ended May 2 with BSE Midcap index ending with marginal gains, large-cap index rising 1 percent, while BSE Small-Cap index falling 1.3 percent.

For the week, the BSE Sensex index jumped 1,289.46 points or 1.62 percent to finish at 80,501.99, and Nifty50 gained 307.35 points or 1.2 percent to end at 24,346.70. However, for April, both the main indices added 3.5 percent each.

Among sectors, the Nifty Oil & Gas index added 4.3 percent, the Nifty Realty index rose 2.5 percent, Nifty Auto, IT, and Healthcare indices rose 1 percent each. However, the Nifty Media index shed 1.7 percent and the Nifty Metal index shed 0.6 percent.

The Foreign Institutional Investors (FIIs) extended their buying in the third consecutive week as they purchased equities worth Rs 7,680.09 crore, while Domestic Institutional Investors (DII) also purchased equities worth Rs 9,269.47 crore.

The BSE Small-cap index declined 1.3 percent with Lloyds Engineering Works, Gensol Engineering, Tanfac Industries, Rajoo Engineers, Tejas Networks, Sterling and Wilson Renewable Energy, KR Rail Enginerring, ISGEC Heavy Engineering, Sterlite Technologies, Godrej Agrovet, Repro India, Five-Star Business Finance, SML Isuzu falling 12-25 percent.

However, Paras Defence and Space Technologies, Sonata Software, Sportking India, Barbeque Nation Hospitality, Krystal Integrated Services, Prime Focus, Go Fashion India, Garden Reach Shipbuilders & Engineers, Jayaswal Neco Industries rising between 15-29 percent.

Domestic markets are expected to remain cautious in the near term amid ongoing geopolitical tensions, although a sharp correction is not currently anticipated. Globally, easing trade tensions between the US and China, coupled with a weakening US dollar, are seen as medium-term positives for emerging markets such as India. However, the recent decline in Q1 US GDP growth adds a layer of uncertainty. In this context, upcoming comments from the Federal Reserve Chair on interest rates and inflation during next week’s FOMC meeting will be closely watched and could significantly influence market direction.

The rising geopolitical tension between India and Pakistan is weighing heavily on the market, leading to high volatility. Historically, previous geopolitical tensions between these countries in the past (Kargil War in May 1999, Surgical Strike in Sept 2016, and Balakot Air Strike in February 2019) have all resulted in a knee-jerk action in the market, and Nifty eventually bounced back strongly from the lows after the events. Hence, any weakness from here could be a buy-on-dips opportunity.

A decisive move above 24500-24600 levels could open more upside towards 24800-25000 levels, and any weakness from here could find support around 24000-23800 levels for the near term.

The index is currently in a consolidation phase, facing resistance near the 24,500 mark on a closing basis. However, rotational buying in heavyweight stocks across sectors is helping to cushion the downside. Hence, any short-term pause or consolidation should be viewed as healthy. Participants are advised to continue with a “buy on dips” strategy, focusing on stock selection based on relative strength.