Nifty reclaims Mount 10K! These small & midcap stocks rose up to 60% in a week

The Bombay Stock Exchange (BSE) building is illuminated during a special "muhurat" trading session for Diwali, the festival of lights, in Mumbai, India, November 11, 2015. Stock markets opened on Wednesday for a special one-hour Diwali holiday session. REUTERS/Shailesh Andrade

The Nifty50 started the week on a positive note as it reclaimed its crucial resistance level of 10,000 in intraday trade on Monday after closing 0.4 percent lower for the week ended 8 September.

The Nifty surged past its crucial resistance level of 9980 in morning trade and now a close above 10,020 would open room for further upside towards 1o,137 which was its previous record highs.

Even though the previous week ended on a muted note, but small and midcap stocks rose up to 60 percent in just 5 trading sessions which include names like NDTV, ESS DEE Aluminium, Sharon Bio, Career Point, Jyoti Structures, Punj Lloyd, Bombay Dyeing, Nitin Fire etc. in the BSE among others.

Small and midcap stocks emerged as outperfomers so far in the year 2017 as well as on 5-year basis. But, given the fact that valuation in most of the stocks are already stretched, fresh buying should only be initiated after studying the fundamentals.

"One needs to be very stock specific in case of small and mid-cap stocks. In this space, the management and company’s business model holds the key," A.K.Prabhakar, Head -Research at IDBI Capital told Moneycontrol.

"If both are stock and the company is impacted by temporary issues in the sector, like that of GST, then the decline in the stock price in short term is an opportunity to buy. We are positive on the small and mid-cap space and recommend being stock specific," he said.

A breakout was on the cards as the index was trading in a narrow range in the past 4 weeks. The Nifty moved in a sideways direction from last one month. After 2008, this is the first time, when Nifty traded within its previous weekly range for four consecutive weeks.

The momentum oscillator ‘RSI – Smoothened’ is placed positively on the daily chart and thus indicating strength in the Nifty.

“We witnessed a positive crossover of ‘5 EMA’ and ‘20 EMA’ on daily chart in penultimate week and the index is sustaining above the same,” Jay Purohit, Technical & Derivatives Analyst at Centrum Broking Limited told Moneycontrol.

“The Nifty has a support of its medium term moving average (50 EMA), which is placed around 9830 levels. However, the trend following indicator ‘SuperTrend’ on daily chart depicts a strong hurdle around 10025 levels. Considering the above key indicators, a sustainable move beyond 9830 – 10025 will decide the further trend in near term,” he said.

The index got stuck in the range due to ongoing geopolitical tensions, as well as lack of any positive triggers. The GDP data released for the quarter ended June 30 also failed to lift sentiments.

The more it consolidates in the range of 9850 – 10000, the stronger will be follow-up move post the breakout, suggest experts. The momentum oscillator ‘RSI’ along with short term moving averages (5 EMA & 20 EMA) on the daily chart are placed positively and thus indicating strength in the index, they say.

“The Nifty has multiple strong supports at lower levels. Various supports are 9800 and 9850 spot levels. We may see short covering in every dip,” Anita Gandhi, Whole Time Director at Arihant Capital Markets told Moneycontrol.

“In the September option contracts, we are seeing options open interest building up in 10000 calls and 9800, 9700 puts, so the probable range for next week could be 9800-10000 with a positive bias. From the option data, we have been seeing a shifting of range to the upper band,” said Gandhi.