Rush for booking profit drives small-caps, mid-caps down over 2%

The Indian market ended a highly volatile on a negative note amid mixed domestic as well as international cues on Friday. Indices witnessed selling amid mixed economic data from US and India, selling by foreign institutional investors and geopolitical tensions. Buying binge by domestic investors, falling crude oil prices and a good start to the quarterly earnings season, however, helped the indices trim some losses.

For the week ended October 14, the BSE Sensex shed 271.32 points or 0.46 percent to close at 57,919.97, while the Nifty50 fell 128.95 points or 0.74 percent to end at 17,185.7 levels.

Among sectors, the Nifty Realty index shed 4.2 percent, Media index fell 3.6 percent and Energy index lost 3 percent. However, the Nifty Information Technology index added 0.8 percent.

The BSE Smallcap index shed 2.2 percent, Midcap 2.6 percent and Largecap index lost 1 percent.

“During the week, investors have been risk-averse due to rising geopolitical turmoil as well as worries about a global economic slump. However, as compared to global counterparts, domestic sell-off was not as aggressive since FII selling was supported by DII inflows,” said Vinod Nair, Head of Research at Geojit Financial services.

The domestic market also focused on quarterly earnings as the IT sector got off to a robust start, which improved the sector’s spirit. Oil prices also decreased as a result of weak demand brought on by recessionary worries and tightening Chinese regulations, which marginally helped India.

“US inflation data came slightly higher than expected, raising fears of an aggressive rate hike. However, the US market rapidly recovered due to the oversold trajectory and limited upside risk to the market and economy,” Nair said.

“We expect the rally to continue in the short-term, led by festival demand, Q2 results, and the positive trend of the global market. Buying at a dip is the best strategy in this scenario, with a focus on domestic economy-oriented stocks and sectors. The sectors which are expected to outperform are IT, pharma, FMCG, durables, green initiatives, specialty chemicals, and mass manufacturers with value buying as the theme.”

During the week, Foreign institutional investors (FIIs) sold equities worth Rs 9,941.71 crore, while domestic institutional investors (DIIs) pumped in Rs 7,030.96 crore. So far in October, FIIs divested Rs 9,978.26 crore, while DIIs invested Rs 8,055.05 crore.

The BSE Small-cap index shed 2.2 percent dragged by Ruby Mills, India Cements, Suzlon Energy, Future Lifestyle Fashions, Power Mech Projects, J Kumar Infraprojects, Welspun Corp, Vakrangee, Punjab Chemicals & Crop Protection and Timex Group India.

On the other hand, Atul Auto, Gayatri Projects, Jindal Drilling Industries, Garden Reach Shipbuilders & Engineers, EKI Energy Services, Black Box, Ugar Sugar Works, Pennar Industries and JMC Projects (India) added 15-30 percent.

The BSE 500 index fell 1.4 percent with India Cements, Adani Wilmar, Suzlon Energy, Welspun Corp, Vakrangee, Zomato, Adani Power, eClerx Services, Lemon Tree Hotels and Mahindra Lifespace Developers losing 10-16 percent.

Where is Nifty50 headed?

Apurva Sheth, Head of Market Perspectives, Samco Securities.

The United States Industrial Production output will have an impact on markets throughout the world. In August, this number fell 0.2% despite expectations of an increase. Will be closely watched to see if the Factory activity has increased or decreased even more. The Chinese economy has drastically slowed down; in Q2FY22, it shrank by 2.6 percent. Investors would be better able to predict the direction of the Chinese economy with the release of the Q3FY22 GDP figures.

Back home, the quarterly results of the companies will occupy the center stage. D-street will be interested to hear the management commentary about future earnings growth trajectory. Investors are encouraged to choose their investments with caution and wisdom in light of the several significant events that will soon take place.

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