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Small & Midcaps struggle in expiry week; more than 100 stocks fall 10-20% in just 5 days

We do not expect a V shape recovery beyond 11300, rather retesting of the last week’s panic low around 10800 cannot be ruled out.

September 26, 2020 / 09:33 AM IST

It was a volatile week for the Indian market followed by a quick recovery on September 25, but bears still remained in control pushing benchmark indices below crucial support levels.

Sensex fell 3.7 percent while the Nifty was down by 3.9 percent for the week ended September 25 compared to 5.2 percent drop in the S&P BSE Small-cap index, and 4.7 percent fall in the S&P BSE Mid-cap index in the same period.

As many as 103 stocks in the S&P BSE Small-cap index that fell 10-20 percent in just five trading sessions.

Stocks that fell in double-digits include Force Motors, TV18 Broadcast, Century Plyboards, Atlanta, ZEE Media Corporation, JB Chemicals, Kwality, Videocon Industries, and Alok Industries.

Note: We have collated a list of the top 20 stocks out of 103, filtered based on the extent of fall seen last week.

BSE Smallcap 26 Sep

Muted global cues, rising cases of COVID across the globe which could delay the economic recovery, uncertainty over the stimulus package, and talks of another lockdown in several parts of the world spooked investor sentiment.

“Markets finally ended the consolidation phase last week and plunged sharply lower. Feeble global cues viz. uncertainty over the stimulus package in the US, rising COVID-19 cases in Europe, and talks of the reimposition of lockdown spooked the investors across the globe as it raised concern over the economic recovery,” Ajit Mishra, VP - Research, Religare Broking Ltd told Moneycontrol.

“Next week, participants will be closely eyeing the outcome of MPC’s monetary policy review meeting scheduled on October 1. Also, they would be eyeing the auto sales number which starts pouring in the first week of every month. On the global front, COVID related updates and performance of world indices will also be in focus,” he said.
Technical View: How is Nifty placed?

Equity benchmarks concluded the September series derivative expiry week on a negative note amid elevated global volatility.

The Nifty50 plunged by about 4 percent to settle the week at 11050. Broader markets performed in tandem with the benchmark as Nifty Mid-cap, Small-cap lost by about 5 percent, each. Sectorally, all major indices ended in red weighed by metal, auto, pharma.

The weekly price action formed a sizable bear candle with a small lower shadow, indicating extended correction on the breach of key support of 11300.
In the process, the index closed below past six weeks low suggesting a pause in upward momentum, despite a pullback after forming a panic low around 200-Days SMA at 10800.

Experts are of the view that the index witnessed a pullback but it will not be a smooth ride on the upside. There is a possibility of a retest of 10800 while on the upside crucial resistance is placed at 11300 but small & midcaps could outperform.

“Empirically, since 2009, post sharp rallies measuring more than 25% - 30% in the Nifty midcap and small cap indices, the average intermediate correction has been to the tune of 12%-15% over next 5-6 weeks. In current scenario, over the past four weeks, both indices have corrected 9% and 10%, respectively from August highs,” Dharmesh Shah, Head – Technical, ICICI direct told Moneycontrol.

“Thus, we expect broader market indices to maintain the same rhythm and endure its relative outperformance against benchmark index Nifty in the coming weeks,” he said.

Shah further added that the upside for the Nifty will be capped at 11300. “We do not expect a V shape recovery beyond 11300, rather retesting of the last week’s panic low around 10800 cannot be ruled out,” he said.

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Kshitij Anand
Kshitij Anand is the Editor Markets at Moneycontrol.
first published: Sep 26, 2020 09:33 am