60 small-cap stocks gain up to 52% despite rush for booking profits

The market snapped a four-week rally and closed half-a-percent lower at the end of a volatile week on July 28 as investors rushed to book profits after the US Federal Reserve raised the rate and hinted at more hikes. Healthy monsoon, mixed earnings, and selling by foreign institutions too added to the volatility.

The BSE Sensex lost 0.78 percent or 524.06 points to end the week at 66,160.20, while Nifty50 shed 0.50 percent or 99 points to close at 19,646.

The broader indices outperformed the main indices with the BSE Small-cap index adding 1 percent, and Mid-cap index 2 percent. The BSE Large-cap Index ended marginally lower.

“The Indian equity market took a breather after four weeks of sustained rally, where the bulls opted to take some money off the table. The benchmark index remained tentative throughout the week, with the majority action happening in the broader space. Amid profit-booking, the Nifty50 index corrected a mere half-a-percent, settling the week around the 19,650 zone,” said Osho Krishan, Senior Analyst for Technical & Derivative Research at Angel One.

The Nifty index restricted its move to 300 points in the week, shrugging off the positive developments among the global bourses. The trend was very much in line with the market expectation, especially after a stellar rally to uncharted territories. Technically speaking, amid the ongoing breather in the market, the chart structure construes optimism, and it is likely to continue the cheerful run in the comparable period.

As far as levels are concerned, till the index firmly withholds the pivotal support of 19,500, there is no sign of caution in the market. While on the higher end, 19,800-20,000 holds stiff resistance and a decisive move beyond which could trigger the next leg of rally.

“We remain sanguine in the market but would advise to avoid undue risks as the market lacks buying conviction in the current scenario. Meanwhile, the broader market looks dazzling with immense opportunity to outperform the indices; hence would advocate traders to focus on stock-specific action. Also, stay vigilant to global developments as they may act as a catalyst in setting up a near-term tone,” Krishan said.

On the sectoral front, the Nifty Realty index gained 5 percent, Nifty Pharma index 4.8 percent, Nifty Healthcare index 4.3 percent, and Nifty Media and Metal indices climbed 3.5 percent each. However, the Nifty Bank, IT and FMCG indices shed 1 percent each.

The BSE Small-cap index added 1 percent with Thangamayil Jewellery, MSP Steel & Power, Foseco India, Indo Borax and Chemicals, Godfrey Phillips India, Jyothy Labs, Heubach Colorants India, Jai Balaji Industries, Mukand, Jagsonpal Pharmaceuticals, Vesuvius India, Gallantt Ispat, Texmaco Rail and Engineering and Jain Irrigation Systems adding 20-52 percent.

On the other hand, Globus Spirits, Abans Holdings, Coffee Day Enterprises, Xchanging Solutions, Jindal Saw, Apcotex Industries, Can Fin Homes, Kriti Industries (India), Sharda Cropchem, Sportking India, Mahindra Logistics, Rail Vikas Nigam, Rane Brake Linings, Tanfac Industries, DCM Nouvelle, Chennai Petroleum Corporation and LG Balakrishnan and Brothers lost 10-18 percent.

“The domestic market passed a volatile week, with the benchmark index underperforming its broader peers. The recent correction in the domestic market can be attributed to several headwinds, including mixed Q1 results, a reversal in FII activity, a rising dollar index and US bond yields, and an increase in crude oil prices,” said Vinod Nair, Head of Research at Geojit Financial Services.

Pharma stocks showed resilience from volatile trade on the back of a positive start to the earnings season and expectations of increased demand from developed economies. Prospects of reduced US pricing issues and expanding operating margins also supported the sector.

The Fed decision to raise the rate by 25 basis points and focus on a data-centric approach for future hikes aligned with the market expectations. However, a better-than-expected US GDP data for the secod quarter impacted the mood in the domestic market as it suggested the likelihood of another rate hike. “In the coming days, domestic earnings will remain a crucial driver, while global cues will also play a vital role in shaping market trends,” Nair said.

In this week, Foreign institutional investors (FIIs) sold equities worth Rs 3,074.71 crore, while domestic institutional investors (DIIs) bought equities worth Rs 5,233.79 crore. In this month so far, FII bough equities worth Rs 14,623.18 crore and DII sold equities worth Rs 3,672.40 crore.

Where is Nifty50 headed?

Jatin Gedia – Technical Research Analyst at Sharekhan by BNP Paribas

The Nifty opened on a flat note and witnessed volatile price action. It drifted lower during the first half and witnessed a sharp recovery towards the close which helped it to close off the intraday lows though down ~14 points. On the daily charts, we can observe that the Nifty has closed in the negative for the second consecutive day. It has been trading in a downward-sloping channel and we expect it to consolidate within this channel. It can witness a bounce towards the key hourly moving averages placed in the range 19690 – 19720 from where we expect the selling pressure to resume.

On the weekly charts, the Nifty has closed in the negative after rising for four consecutive weeks and which also suggests that the Nifty can consolidate. The momentum indicator has a negative crossover which is a sell signal and thus the pullbacks shall be difficult to sustain. Overall, the short-term outlook remains range bound between 19500 – 20000. Crucial support levels to keep handy are 19540 – 19500 and on the upside, 19700 – 19720 is the immediate hurdle zone.

Bank Nifty opened the gap down and witnessed a weak closing. Though it witnessed a pullback during the last hour of the session, however, the structure still points towards a short-term consolidation. On the weekly chart as well we can observe that the Bank Nifty traded within the range 44700 – 46370 of the penultimate week and thus formed an Inside Bar pattern which makes the extremes of the range crucial levels to watch out for in the short term. A breach of this range on either side shall lead to a move in that direction. Overall, we expect the Bank Nifty to consolidate between 46500 – 45000.

Rupak De, Senior Technical analyst at LKP Securities:

From the current level until the Nifty breaks below 19550 no directional down move is expected or the market may not favour aggressive shorts. On the other side, below 19550 the index may fall towards 19300. Resistance on the higher end is placed at 19700.

Amol Athawale, Technical Analyst (VP), Kotak Securities

Weak European market cues and negative US futures kept the local market mood bearish for a major portion of the trading session. Profit taking in banking and IT stocks weighed on indices, although strong buying in realty shares helped markets pare losses. All eyes will now be on RBI’s credit policy, as it would be interesting to see if the central bank also follows the US Fed and hikes interest rates, which could hurt growth prospects going ahead.

Technically, on intraday charts, the Nifty has formed a lower top formation, which is largely negative. For positional traders, the 20-day SMA or 19580 would act as a sacrosanct support zone. If the index succeeds to trade above the same, then it could bounce back till 19800. On further upside it could lift the market till 19900. On the flip side, a fresh sell off is possible only after the dismissal of 19580 and below the same it could slip till 19450-19400.

In the case of Bank Nifty, the 20-day SMA or 45250 could be the trend decider level, and above the same the index could move up till 45700-45900. On the other side, below 45250 it could slip till 44700-44500.

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