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Last Updated : Feb 22, 2020 10:45 AM IST | Source: Moneycontrol.com

Small & Mid-caps outperform in a truncated week; 40 stocks rose 10-30%

As many as 40 stocks in the S&P BSE Small-cap index rose 10-30 percent, including Mirc Electronics, Heritage Foods, Indo Count Industries, JMT Auto, and DHFL among others

 
 
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The Indian markets remained volatile in the week gone by with benchmark indices recording a negative closing in three out of four trading sessions for the week ended February 20.

Small and mid-caps, however, bucked the trend.

Rising coronavirus (COVID-19) fears capped upside for markets across the globe but expectations of further stimulus measures from China to fuel growth in Asia’s largest economy boosted risk-on sentiment.

Close

On a weekly basis, the Nifty50 closed with losses of 0.27 percent while the S&P BSE Sensex fell 0.21 percent for the week ended February 20. In the broader market space, the S&P BSE Small-cap index was up 0.44 percent while the S&P BSE Mid-cap index gained 0.20 percent in the same period.

As many as 40 stocks in the S&P BSE Small-cap index rose 10-30 percent. These include Mirc Electronics, Heritage Foods, Indo Count Industries, JMT Auto, DHFL, Firstsource Solutions, Indiabulls Ventures, IOL Chemicals and Subex among others.

In the Mid-cap space, three stocks recorded double-digit returns. These were Nippon Life, Max Financial Services and Muthoot Finance.

The broader market continued its winning run despite volatility in the benchmark indices which suggest that investors are using dips to get into beaten-down stocks where valuations now look attractive, suggest experts.

Feb BSE 500 1

Feb BSE 500 2

"The valuation gap between large-caps and mid and small-caps have been narrowing. The demand for mid and small-caps is likely to improve on the back of improved corporate earnings, cheap valuations and large inflows seen from domestic investors," Pankaj Bobade, Head- Fundamental Research, Axis Securities told Moneycontrol.

"The recent targeted measures taken by RBI would relieve stress on the housing, auto and retail loans, enabling improvement in demand for these sectors; overall, the interest rates are expected to be soft in the near future, which would be beneficial for companies across the economy," he said.

Mid and small-cap companies are likely to benefit more when the economy starts doing well. Ample liquidity clubbed with low-cost credit are essential ingredients that could benefit the mid and small-cap sectors.

Where is Nifty headed?

The Nifty closed the week with minor losses. The index formed a bearish candle on the daily charts on February 20 and a small-bodied candle on the weekly scale.

Momentum oscillator RSI is moving in the sideways direction in both daily and weekly scale and thus not suggesting any trending move in coming days, suggest experts.

"Considering overall chart structure, we are expecting the Nifty to move in the broader range of 11,900 – 12,250 in current series," Chandan Taparia, Vice President, Analyst-Derivatives at Motilal Oswal Financial Services told Moneycontrol.

"At the current juncture, the positive implication of a Bullish Island Reversal pattern is still intact and till the time. As long as Nifty holds above 12030 levels, we maintain our positive stance for a bounce towards 12,200 and then 12,300 levels. On the flip side, major support is placed at 12,030 and then 11,900 zones,” Taparia said.

From the derivatives front, the Nifty has continued to consolidate near 12,000 levels amid outflows seen from foreign institutional investors (FIIs) during the week. This consolidation is expected to continue until this month’s expiry and 11,950 is likely to act as support, suggest experts.

"The volume-weighted average price (VWAP) of this series is placed near 12,040, which has become pivotal for this series. The major Call writer’s positions are placed at 12,200 strikes, which has become a major resistance of this consolidation," Amit Gupta, Head of Derivatives at ICICI Direct told Moneycontrol.

"However, the Put base at 12,000 is still intact near which base formation may be seen in the index. The volatility has remained subdued and is not picking up lately, which makes us believe these are writing positions. Hence, 11,950-12,000 should remain immediate support," Gupta added.

The Bank Nifty witnessed a volatile week. For the week, the open interest rose from 1.1 million shares to 1.45 million shares along with a fall in prices indicating short formation. However, IVs cooled off marginally while the Put OI additions continued indicating limited downsides

"Rollover is likely to pick up, which will trigger some volatility, going ahead. However, major OI additions for the week were seen in 30,500 strikes Put whereas Call blocks were seen at 31,500 strikes indicating possible consolidation in the expiry week. Options premiums are likely to erode due to possible time value decay due to long weekend," as per Gupta.

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

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First Published on Feb 22, 2020 10:45 am
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