27 smallcaps gain 10-34% as market bounces back; midcap index flat

Market closed with a gain of 0.5 percent amid volatility for the week ended January 13, and pared some of the previous week’s losses. Continued selling by FIIs and buying from DIIs, better than expected CPI data from US and India and positive start to the earnings from IT majors boosted the investor sentiment.

For the week, BSE Sensex rose 360.81 points or 0.60 percent to end at 60,261.18 and Nifty50 added 97.15 points or 0.54 percent to settle at 17956.6 levels.

However, for the month both the equity benchmarks lost 1 percent each.

Among sectors, BSE metal and information technology indices added 3 percent each and power and capital goods indices rose more than 2 percent each. On the other hand, BSE Consumer Durables index lost 3 percent and FMCG index shed nearly 1 percent.

BSE Large-Cap index added 0.6 percent, Mid-Cap index ended flat and Small-cap index rose 0.26 percent, during the week.

“The Frontline Index is trading in a very narrow range from 18,300 to 17,800 levels since past four weeks. The present scenario for traders has become very difficult because as volatility in the market has shot up on the one side and the trading range has narrowed down considerably on the other,” said Rohan Patil, Technical Analyst, SAMCO Securities.

According to Patil, this week Nifty on the weekly chart has formed a Doji candle stick pattern and the wicks of the candle were of equal size on both ends indicating indecision among the traders.

“The benchmark Index this week has made a couple of attempts to breach 17,800 – 17,780 levels but was not successful as prices were continuously finding support near that zone.”

“Currently, traders should wait patiently for the prices to break above 18,150 or below 17,800 levels to initiate the next actionable move because presently market is in no trading zone,” Patil said.

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Foreign institutional investors (FIIs) continued the selling in this week also, as they remained net sellers throughout the week. FIIs sold equities worth Rs 9,605.64 crore, while domestic institutional investors (DIIs) bought equities worth of Rs 10,042.08 crore.

However, in this month till now, FIIs offloaded equities worth Rs 17,419.08 crore and DIIs bought equities worth Rs 12,798.66 crore.

“The Nifty, in the week gone by, witnessed sharp swings in both the directions & ultimately posted a positive weekly close. It has formed a Doji pattern on the weekly chart,” said Gaurav Ratnaparkhi, Head of Technical Research, Sharekhan by BNP Paribas.

For the last few weeks, the index is trading above the 20 WMA, which has resulted in a Triangle pattern formation on the daily chart, Ratnaparkhi said. After a recent base formation near the lower end of the pattern, the Nifty witnessed smart recovery on January 13, he added.

“Going ahead, 18,000-18,050 will be the key area beyond which the index will be set for a larger up move. On the downside, 17,800 will continue to provide cushion for the index,” Ratnaparkhi explained.

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Among the Small-cap, BCL Industries, Sterling Tools, KBC Global, Goldiam International, Transformers and Rectifiers India, Rategain Travel Technologies, Kolte-Patil Developers, Cressanda Solution and Edelweiss Financial Services added 16-34 percent.

However, Nureca, Music Broadcast, TD Power Systems, TruCap Finance and FIEM Industries lost more than 10 percent each.

“Positive triggers like easing inflation numbers and brighter Q3 results projected by the second set of IT majors buoyed the domestic market to close the week on a positive note. India’s retail inflation eased to 5.7% in December, remaining within the RBI’s tolerance band of 2-6%, owing to reduced food prices,” said Vinod Nair, Head of Research at Geojit Financial services.

“Similarly, the US inflation numbers cooled off to 6.5%, fuelling bets that the Fed will pursue a less aggressive tightening policy. US wage growth slowing, service activity contracting, and December payrolls rising higher than anticipated increased the possibility of a softer landing for the US economy.”

“However, cautious growth forecasts by IT majors squeezed out optimism. Relentless selling by FII over the week as a result of premium valuations in the domestic market also weighed on the overall market momentum. Going ahead, with IT earnings out of the way, investors will now focus their attention on the earnings of financials, which are expected to be released over the weekend,” he added.

Where is Nifty50 headed?

Amol Athawale, Deputy Vice President – Technical Research at Kotak Securities

Technically, on weekly charts the Nifty has formed a long legged Doji candlestick formation. For the next few trading sessions, the 100-day SMA (Simple Moving Average) or 17,900 would act as sacrosanct support levels.

A pullback formation above the same could drive the index to 20-day SMA or 18,075. Further upside may also continue which could lift the index till 18,200.

On the other hand, a fresh round of selling is possible only after the dismissal of 17,800 and below the same, the index could slip till 17,650-17,600.

Ajit Mishra, VP – Technical Research, Religare Broking

Markets will react to the HDFC Bank’s result in early trade on Monday. The recent recovery in the global markets has failed to impress the participants so far however the mood might change if they manage to sustain the gains.

To regain some strength, Nifty should decisively cross the 18,100 mark. Meanwhile, participants should restrict positions and prefer a hedged approach.

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