These smallcaps fell 10-26% as broader indices underperformed in third week

Market This Week

The broader indices remained under pressure in the third consecutive week and also underperformed the main indices amid mixed Q3 earnings so far, persistent FII selling.

This week, BSE Sensex shed 428.87 points or 0.55 percent to end at 76,190.46, while the Nifty50 index fell 111 points or 0.47 percent to close at 23,092.20.

Among sectors, Nifty Realty index declined 9 percent, Nifty Energy index down 4 percent, Nifty Media and Oil & Gas down 4.5 percent each. However, Nifty Information Technology index added 3.5 percent and Nifty FMCG index added 0.5 percent.

Foreign Institutional Investors (FIIs) remained net sellers during the week, as they offloaded equities worth Rs 22,504.08 crore, while Domestic Institutional Investors (DII) bought equities worth Rs 17,577.36 crore.

However, in this month till now, FIIs sold equities worth Rs 69,080.14 crore, while DIIs compensated with purchased of equities worth Rs 66,944.50 crore.

Indian equity markets continued its underperformance versus most global markets this week. Broader market remained weak with the midcap and the smallcap indices underperforming the larger peers. Majority of the sectoral indices ended the week in the red with BSE realty index witnessing sharp correction. BSE IT index was an outlier as it performed strongly in a relatively weak market. FII continue to remain net seller of Indian equity, adding pressure on the market performance," said Shrikant Chouhan, Head Equity Research, Kotak Securities.

"Q3FY25 earnings season has largely in line with our subdued expectations. INR appreciated marginally and Brent crude has corrected this week. Multiple events including global events, upcoming Union Budget, RBI policy and ongoing Q3FY25 season will continue to shape market movements over the next fortnight," he added.

The BSE Small-cap index fell 4.2 percent with Newgen Software Technologies, Cyient, India Cements, Pearl Global Industries, Netweb Technologies India, Sundaram-Clayton, Sterling and Wilson Renewable Energy, Ramkrishna Forgings fell 18-26 percent. However, MPS, Fairchem Organics, Capri Global Capital, Zensar Technologies, SML Isuzu, Jana Small Finance Bank, Ramco System, Vishnu Chemicals, Bombay Burmah Trading Corporation and Globus Spirits gained between 7-24 percent.

In the short term, the bears may maintain the upper hand as long as the index fails to surpass the 23,450 level. Any rise toward the 23,350–23,450 zone is likely to encounter selling pressure. However, the downside may remain limited unless the 23,000 level is breached.

The near-term trend of Nifty remains weak. A slide below the immediate support of 22975 levels could open the next downside towards 22800 levels. Any upside bounce towards 23350-23400 could be a sell on rise opportunity.

Technically, the Nifty on a daily scale has formed a red candle indicating weakness. However, index managed to defend the recent swing low of 22,980. Till index holds the level of 22,980, short term pullback towards 23,300-23,400 could be possible. On the flip side, sustaining below the recent swing low of 22,980 could lead to weakness towards 22,850-22,800 levels. On the upside, the 250-Days Simple Moving Average (250-DSMA) hurdle is placed around 23,600 levels, which will act as major resistance for the index. Thus, the sell on rise strategy should be adopted in Nifty.

Since the past four trading sessions the Nifty is trading in the broad range of 23000 – 23400. Divergence among the daily and hourly time frame momentum indicator can lead to further consolidation. Bollinger bands are contracting also suggesting a rangebound movement. Thus until, the Nifty does not breach the support zone of 23050 – 23000 we can expect the rangebound price action to continue.

On the Nifty a breach below 23000 could lead to a fall towards 22670 which coincides with the 38.2% Fibonacci retracement level of the rise form 16828 – 26277.