The rally is certainly visible in the cement, auto and auto ancillary, financial and metal sectors all alike, but at the same time it indicates that this leg of Bull Run is now nearing exhaustion.
Benchmark indices might have hit fresh record highs, but the real action was seen in the small and mid-cap space which outperformed both the Sensex and Nifty by a wide margin for the week ended January 17.
The S&P BSE Sensex rose 0.83 percent while the Nifty50 ended with gains of 0.78 percent for the week ended January 17.
Broader markets outperformed as the S&P BSE Mid-cap index was up 3.6 percent, and the S&P BSE Small-cap index closed with gains of 3.97 percent for the week ended January 17. The Nifty Midcap index hit a fresh seven-month high on January 17.
As many as 123 stocks in the S&P BSE smallcap index rose 10-60 percent in the past five trading sessions. These include Liberty Shoes, MMTC, VIP Industries, Ramco System, Birla Corp, Simplex Infra and Vipul.
As many as six stocks in the Midcap index rose 10-20 percent for the week ended January 17. These include Berger Paints, Tata Global Beverages, Hindustan Aeronautics, IGL and Emami.
"Markets during the week inched higher with heavyweights, but this time mid-cap joined the rally and gave a phenomenal run-up. The earnings season has set in and numbers look encouraging when compared on a year-on-year (YoY) basis, thanks to corporate tax reduction," said Jimeet Modi, Founder & CEO, SAMCO Securities & StockNote.
"Signs of a conspicuous rally in the second rug stocks from various sectors largely signal that valuations of first-line quality stocks are at rich levels. This is what is making these second-tier stocks move higher in a so-called valuation catch up the rally," he said.
Modi further added that the rally is certainly visible in the cement, auto and auto ancillary, financial and metal sectors, but at the same time, indicates that this leg of Bull Run is now nearing exhaustion which should hopefully last till Budget.
The Nifty formed a small bullish candle on the weekly charts. It is trading above crucial short term moving averages and a break above 12,400 could open the door for the index to head towards 12,450-12,500 levels.
Benchmark indices have faced stiff resistance at higher levels especially around 12,400 on the Nifty and 42,000 on the Sensex.
The Nifty is entering a sideways phase largely depicting exhaustion on the higher side, suggest experts. Traders should avoid taking pre-emptive shorts as long as the Nifty holds above 12,300 levels.
"Technically, Nifty formed a small body candle on the daily chart. It formed an inside bar pattern on a daily scale, indicating indecisiveness among market participants," Siddhartha Khemka, Head - Retail Research at Motilal Oswal Financial Services Private told Moneycontrol.
"Traders are advised to refrain taking pre-emptive shorts till the Nifty sustains above its immediate support of 11,280 – 12,293 zone. While major support exists at 12,150 levels. On the flipside, resistance is placed in the zone of 12,450 – 12,500," Khemka noted.
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