These smallcaps up 10-32% as Sensex hits fresh record high despite volatility

Amid intensified volatility, the market hit record highs in the week ended June 23 but failed to sustain at higher levels on prevailing concerns over global issues – including fears over China’s growth prospects, hotter UK CPI inflation data, hawkish commentary from Fed Chair Jerome Powell, the unexpected rate hike by the Bank of England and delayed monsoon.

On June 22, BSE Sensex touched a fresh record high of 63,601.71, while Nifty remained just 1 point away from its record high of 18,887.60.

In this week, BSE Sensex fell 0.63 percent or 405.21 points to finish at 62,979.37, and Nifty50 shed 0.85 percent or 160.5 points to end at 18,665.50.

BSE Large-cap, Mid-cap and Small-cap index lost 1 percent each.

“The domestic market sailed through a rough week, facing unexpected ups and downs as it hovered around its historical peaks and exhibited cautiousness stemming from weak global cues. This volatility was more evident in mid- and small-cap stocks, which witnessed increased selling as investors booked profits following a strong recent rally,” said Vinod Nair, Head of Research at Geojit Financial services.

“In the global context, central banks worldwide are currently focused on addressing inflation and have reiterated their commitment to achieving their target levels. This is reflected in the hawkish commentary from the Fed Chair and the rate hikes by the central banks. Conversely, the decision of Chinese central banks to cut rates after a 10-month pause has raised concerns about the health of the Chinese economy.”

“Despite these global concerns, the domestic market is not anticipated to undergo a significant correction. This is due to favourable domestic economic indicators and a correction in international commodity prices, which are expected to sustain earnings growth on a QoQ basis,” he added.

All the sectoral indices ended in the red with Nifty Media index shed 3.6 percent, Nifty Metal index fell 3 percent, while Oil & Gas, FMCG and Realty down 2 percent each.

The BSE Small-cap index shed 1 percent dragged by IIFL Securities, Udaipur Cement Works, Future Consumer, IDFC, Aptus Value Housing Finance India, Manaksia, Aegis Logistics, Mishtann Foods, MPS, Reliance Power and Ador Welding.

On the other hand, Antony Waste Handling Cell, Subros, Ddev Plastiks Industries, DMCC Speciality Chemicals, HPL Electric & Power, Sintex Plastics Technology and LG Balakrishnan and Brothers rose 23-32 percent.

“The Indian stock market had a promising start to the week, with the possibility of Nifty reaching a new high. However, profit booking occurred on the same day and continued until the first half of Tuesday, causing a retest of levels around 18650. Taking advantage of this, the bullish camp initiated strong buying, driving prices higher in an attempt to achieve new highs on Wednesday and Thursday. However, another failed attempt led to profit booking and a drop in prices back to Tuesday’s low. As a result, the week ended with a loss of 0.85%, just above the 18650 level,” said Rajesh Bhosale, Technical Analyst at Angel One.

“Although there were no significant changes in the key indices, the Nifty Midcap, which had been performing well recently, experienced a sharp correction in the last two days. Volatility within this space is expected to continue to rise. Therefore, traders should be selective in their stock choices and focus on frontline counters, which are considered safer bets in such a scenario. Additionally, attention should be paid to the banking sector, as it has been oscillating within a range for over a month and is now at an interesting juncture where a strong movement in either direction can be anticipated in the near term,” he added.

In this week no Major contribution was seen from Foreign institutional investors (FIIs), however, domestic institutional investors (DIIs) bought equities worth Rs 1,693.08 crore.

Where is Nifty50 headed?

Rupak De, Senior Technical analyst at LKP Securities:

The Nifty has shown weakness recently, as it has experienced a decline for two consecutive days. On a smaller time frame, the index slipped further. Additionally, the Relative Strength Index (RSI) indicates negative divergence, indicating a weakening bullish momentum.

Looking at the support levels, there is visible support at 18500, and if the index breaks below this level, it could potentially drop towards 18200. On the other hand, there is resistance at 18800 on the higher end of the index.

Amol Athawale, Technical Analyst (DVP), Kotak Securities

Nervousness continued to grip the markets as the US Fed indicating two more rate hikes this year raised concerns over the slackening global economic growth. In addition, mounting fears over China’s growth prospects and falling crude oil demand are the negative catalysts prompting investors to go risk-off in equities. Sharp selling in metals, oil & gas and power stocks dragged Sensex below the 63k-mark after having hit a fresh high during the week. Technically, on intraday and daily charts, the Nifty has formed a double top formation and also formed a bearish candle on weekly charts which is broadly negative.

For traders the 20 day SMA (Simple Moving Average) or 18650 would act as a sacrosanct support level. If the index trades above the same then it could retest the level of 18880 and move up to 19000. Below the 20-day SMA or 18650, the market could slip till 18500-18450.

The Bank Nifty has formed a lower top formation and is currently trading near the 50-day SMA. For Bank Nifty traders, a 50-day SMA or 43500 would act as a key support level, above which a quick pullback rally till 20-day SMA or 44000-44300 is possible. On the other side, below 50-day SMA or 43500 it could slip till 43300-43000.

Deepak Jasani, Head of Retail Research, HDFC Securities

Nifty fell for the second consecutive session on June 23 pulled lower by negative global cues. At close, Nifty was down 0.56% or 105.8 points at 18665.5. Broad market indices fell more than the Nifty even as the advance decline ratio fell further to 0.38:1.

Global stocks fell on Friday, extending their declines for the week and edging towards their worst week since March, as traders worried that central banks’ efforts to curb sticky inflation will lead to recessions and strengthen the US dollar.

Nifty formed a bearish Dark Cloud Cover pattern on weekly charts after falling 0.85% over the week. A quick recovery and move beyond the all time high may be difficult in the near term. Nifty could find support in the 18459-18555 band while 18795 could offer resistance on upmoves in the near term.

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