Geopolitical concerns halt record highs on Nifty but 100 small-caps rose 10-40% in a week

Bulls that were raising the benchmark indices towards fresh record highs were hit by a geopolitical storm which pushed the Sensex and Nifty lower for the week, underperforming the broader market indices. The S&P BSE Sensex fell 0.18 percent while the Nifty50 was down by 0.27 percent for the week ended January 3 compared to the 1.2 percent rally seen in the S&P BSE Mid-cap index, and over 3 percent gain seen in the S&P BSE Small-cap index in the same period. Benchmark indices witnessed a kneejerk reaction after the United States of America's airstrike in Iraq, which killed top Iranian commander Qassem Soleimani and fuelled risk-off sentiment. Reacting to the news, the crude oil prices rose by about $3/bbl, and the Rupee plunged by 0.54 percent against the US Dollar, Reuters reported. The benchmark indices might have failed to keep the gains for the week but smart money moved into small and mid-caps. As many as 146 stocks in the S&P BSE Small-cap index rose 10-40 percent in five trading sessions. These include Monnet Ispat, Indiabulls Real Estate, Suzlon Energy, VA Tech Wabag, and Reliance Industrial Infrastructure. In the Mid-cap space, four stocks rose over 10 percent, including PNB Housing Finance, Motilal Oswal Financial Services, SAIL and KIOCL.

 Experts are of the view that upside is likely to remain capped in the near term due to ongoing geopolitical concerns but small and mid-caps could outperform as most of them are trading at attractive valuations.

"Markets could be volatile going ahead due to the risk of possible retaliation from Iran.  Oil is likely to be on the boil. It is bad news for large oil-importing countries, especially those like India, which run large trade and current account deficits," Rajesh Palviya, Head Technical & Derivative Research at Axis Securities told Moneycontrol.

"We expect midcaps and small-caps to outperform going ahead and IT, Pharma and metal sector to outperform," Palviya added.

Technical View for the week: The Nifty closed the week on a bearish note but held on to it crucial support at 12,200 levels which suggests that bulls could reclaim lost glory in case the index climbs above 12,293 levels to make a fresh record high. The trend still remains to be on the upside as long as the Nifty trades above 12,100. Investors should use dips to buy into quality stocks, suggest experts. "Bears try to pounce on back of the global development and push the index lower. The market breadth was a tad negative but nothing alarming. Overall, the trend continues to remain up and we continue to maintain our bullish stance and our target of 12,400-12,450 zone. The near term, support is placed at 12,200 zone," Amit Shah, Technical Research Analyst, Indiabulls Ventures told Moneycontrol. "Broadly, we expect mid and small caps to outperform going ahead and metal space will continue to shine. The supports are placed at 12,200-12,100, and resistance are placed 12,300-12,400," Shah said.   Disclaimer: The views and investment tips expressed by investment 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.