Market rally helps more than 50 small-caps to post double-digit returns

The Indian equity market bounced back and added over 1 percent in a volatile (monthly expiry) week ended on May 26 on the back of strong earnings, buying frenzy by both foreign and domestic institutions, and hopes of a normal monsoon and better economic growth data.

The BSE Sensex climbed 772.01 points or 1.25 percent to end at 62,501.69, and the Nifty50 added 295.9 points or 1.62 percent to close at 18,499.30. The Sensex and the Nifty added 1 percent and 0.77 percent so far this month.

For the week, BSE Mid-cap, Small-cap and Large-cap indices scaled 2.5 percent, 1.4 percent and nearly 2 percent, respectively.

“The domestic market defied weak cues from the global markets and put up a widespread rally, driven by the strong growth forecast for the Indian economy,” said Vinod Nair, Head of Research at Geojit Financial Services.

“With the upcoming Q4 GDP data, it is anticipated that India’s FY23 GDP will marginally surpass the earlier projected 7 percent growth rate. Additionally, the expectation of a normal monsoon and consistent FII buying further boosted confidence among domestic investors,” he said.

All the sectoral indices ended in the green. The Nifty Metal index added 5.6 percent, Pharma index 4 percent, Media index 3.8 percent, Healthcare index 3.8 percent and the Information Technology index 3.7 percent.

The BSE Small-cap index gained 1.4 percent supported by Optiemus Infracom, Nucleus Software Exports, Schneider Electric Infrastructure, Indiabulls Real Estate, Hindware Home Innovation, Dixon Technologies, Onward Technologies and Shreyas Shipping.

However, losers were GE T&D India, Lincoln Pharmaceuticals, Orient Bell, Ashapura Minechem, Arihant Superstructures, Polyplex Corporation, JK Lakshmi Cement, Dishman Carbogen Amcis and GRM Overseas.

“The markets remained quite bullish, more or less insulated from developments elsewhere. The uptick seen during the week was across market caps and sectors. The prolonged negotiations in the US on the budget ceiling is being looked at with some amount of consternation as the consequences may be devastating if an agreement is not reached. But the probability of an agreement being hammered out is very high,” said Joseph Thomas, Head of Research at Emkay Wealth Management.

“Other significant influences on the market would be the economic numbers as well as speculations on the intensity of the economic slide that is likely to happen in the coming quarters. External developments will be of consequence to the markets in the coming weeks more than any domestic event,” he added.

The buying binge among investors saw foreign institutional investors (FIIs) pick up equities worth Rs 3,230.49 crore, while their domestic peers (DIIs) pumped Rs 3,482.21 crore into the market during the week. FIIs purchased equities worth Rs 20,606.80 crore and DIIs sold equities worth Rs 1,192.47 crore so far this month.

Where is Nifty50 headed?

Amol Athawale, Technical Analyst (VP), Kotak Securities

The short-term market outlook is considered robust, with key levels at 1,8350/62,000 acting as trend deciders. If the index moves above these levels, it could rise towards 18,600/62,800 and potentially continue further to 18,680/63,000. Conversely, if the index falls below 18,350/62,000, traders may prefer to exit their long positions.

For Bank Nifty traders, the 20-day SMA and 43,600 are important support levels. If the index remains above this zone, it could rally towards 44,500-44,700. However, a fall below 43,600 may accelerate selling pressure, leading to a potential retest of levels around 43,400-43,000.

Jatin Gedia, Technical Research Analyst, Sharekhan by BNP Paribas:

The Nifty has finally decisively broken out of the sideways consolidation on the upside. After two weeks of consolidation the Nifty has once again resumed its upmove. This breakout is likely to be a broad-based rally and we expect participation from all sectors hereon.

On the upside, we expect the Nifty to target levels of 18,800 which is the 161.82 percent Fibonacci extension level of the five wave rise (18,060 – 18,420) on the hourly charts. The hourly momentum indicator has a positive crossover, and the daily momentum indicator is on the verge giving a positive crossover. Thus, both price and momentum indicator suggest that the positive momentum is likely to continue. Overall, from short term perspective we change the outlook to positive for target of 18,800.

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