Over 60 smallcaps gain up to 41% in market’s record sprint

It was yet another record-breaking week for the Indian market, as continued buying by foreign institutional investors (FIIs), monsoon progress and expectations of healthy Q1 numbers bolstered sentiment, with small-cap stocks shinning bright.

In the week ended July 7, the 30-pack Sensex added 0.86 percent, or 561.89 points, to end at 65,280.45, and the broad-based Nifty rose 0.74 percent, or 142.75 points, to close at 19,331.80. It was the first time that the Sensex went past 65k and the Nifty 19,500.

During the week, the Sensex also touched a new high of 65,898.98 and the Nifty 19,523.60.

“Economic activities showed signs of strength, with the manufacturing PMI expanding to 57.8, indicating sustained demand and boosting confidence in the manufacturing sector’s prospects,” said Vinod Nair, Head of Research at Geojit Financial Services.

Provisional business numbers from banks, automakers, and real estate companies bolstered investor confidence, while FIIs provided additional support to the domestic market, Nair said.

Heightened trade tensions between the US and China, along with uncertainties stemming from the hawkish US Federal Reserve meeting minutes tested the risk appetite of global investors, he said.

Market participants are eagerly awaiting domestic and US inflation numbers for insights into the sustainability of the rally. “Given the elevated market valuation, profit booking is visible at the upper band of the rally,” Nair said.

Sectors and stocks

The BSE largecap, midcap and smallcap indices rose 0.7 percent, 0.8 percent and 1.6 percent, respectively.

On the sectoral front, BSE oil & gas index rose 4.6 percent, realty and auto indices 2 percent each and FMCG index added 1.5 percent.

After a big leap in the last few weeks, the market turned a bit weary and moved lower by end of the week. Indications of a likely rate action from the US Fed in this month’s meeting led to a slump in the overseas markets, said Joseph Thomas, Head of Research, Emkay Wealth Management

“There is a narrative that is emerging that inflation might be more persistent than it is thought to be at this juncture, going by the conditions that prevail in the US as also Europe, and the consequent rate action will be north-bound. This will have its impact causing some turbulence in the immediate term,” he added.

The BSE smallcap index gained 1.6 percent with Zee Media Corporation, HPL Electric & Power, Black Box, Genus Power Infrastructures, Olectra Greentech, Dish TV India, Sunflag Iron and Steel Company and Action Construction Equipment rising 21-41 percent.

On the other hand, PTC Industries, TruCap Finance, Abans Holdings, IOL Chemicals and Pharmaceuticals, Surya Roshni, Parag Milk Foods, Transpek Industry, Jay Bharat Maruti, Pearl Global Industries and Faze Three declined 8-16 percent.

During the week, FIIs bought equities worth Rs 20,361.75 crore, while domestic institutional investors (DIIs) sold equities worth Rs 1,564.60 crore.

In June, FIIs bought equities worth Rs 27,250.01 crore and DIIs Rs 4,458.23 crore.

Where is Nifty50 headed?

Siddhartha Khemka, Head – Retail Research, Motilal Oswal Financial Services

Markets are likely to sustain the momentum, as stock-specific action will pick up with the onset of the Q1FY24 earning season. India’s retail Inflation data to be released next week will also offer some cues. The technology sector is likely to remain in focus with TCS and HCL Tech announcing their result on July 12 followed by Wipro the next day.

Amol Athawale, Vice President-Technical Research, Kotak Securities

If the Nifty trades below 19,450, the correction wave is likely to continue. Below it, the index can slip to 19,250-19,200. A fresh uptrend is possible only if the Nifty goes past 1,9450 after which it can move to 19,550-19,625.

Contra traders can take a long bet near 19,200 with a strict support stop loss at 19,150.

For Bank Nifty, 45,000 will act as a sacrosanct level, below which it can slip to the 20-day simple moving average or 44,300-44,200. Above 4,5000, the index can move to 45,500-45,700.

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