D-Street Talk podcast | Small & midcaps likely to outperform in second half of 2020; 7 stocks to buy: Dharmesh Shah

The momentum in the Nifty50 is likely to continue and could well take the index towards 10900 levels in July, but money-making opportunities are available in the small & mid-caps space that could outperform in the second half of 2020, Dharmesh Shah, Head – Technical, ICICI direct said in a podcast ‘D-Street Talk’ with Moneycontrol.

The Nifty Midcap and Nifty small-cap indices have undergone significant price correction of over 50 percent each since 2018 high while time-wise the current decline has consumed 26 months (no bear market in two decades lasted for more than 19 months (CY2000-2001)).

This significant price/time correction has helped indices to work out of the excesses built-in the bull market of 2014-2017 and most negatives now seem priced in, offering favourable risk-reward setup, said Shah.

The stocks which are looking attractive according to Shah are Balkrishna Industries, Trent, Natco Pharma, Deepak Nitrite, MCX, Rallis India, and Bajaj Electricals.

Despite elevated global volatility, Nifty midcap and small-cap indices relatively outperformed during June 2020, as both indices rallied 11 percent and 15 percent, respectively.

Meanwhile, on the breadth front, more than 65 percent of constituents of the Nifty mid-cap and small-cap indices are sustaining above their 100-Days SMA compared to last month’s reading of ~30 percent, indicating improving market breadth that signifies broader market participation.

In the near term, Shah expects the index to resolve higher and extend the ongoing up move towards 10900 which is the confluence of 200 days SMA, placed at 10890, coincided with the negative gap seen during mid-March (10827–10752).

He further added that the formation of higher peak and trough underpinned by improving market breadth makes us confident of revising support base on Nifty at 10200 as it is, a) 38.2% retracement of last major up move (9544 – 10553), at 10168 b) in three out of past seven sessions Nifty bounced from 10200 mark, indicating elevated support at last week’s low of 10200.

Tune in to the podcast for more

Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.