64 smallcap stocks spike 10-37% amid record run on Dalal Street

The market scaled yet another new high in the trading week ended July 14 as soft US inflation print fuelled hopes of a rate hike pause by the Federal Reserve and kept up the buying binge of foreign investors. Improving monsoon and rebound in IT companies with decent earnings helped the rally sustain its momentum.

The BSE Sensex gained 1.19 percent or 780.45 points to close at 66,060.90, and the Nifty50 added 1.20 percent or 232.7 points to end at 19,564.50. During the week, the benchmark indices hit their fresh record highs of 66,159.79 and 19,595.35. The BSE Large-cap, Mid-cap and Small-cap indices added 1 percent, 1.3 percent and 1.7 percent, respectively.

“The Indian equity markets had a splendid move in the eventful week, in which the benchmark index Nifty50 witnessed continuation in the uptrend consecutively for the third week. The broad-based participation amid the commencement of earning season showcased the eagerness of the bulls to levitate the market. The Nifty50 index maintained its positive stature and clocked new highs to settle the week in uncharted territory, procuring 1.20 percent of weekly gains,” said Osho Krishan, Senior Analyst for Technical and Derivative Research at Angel One.

“The supportive moves among the global peers and the sectoral rotation were evident throughout the week, which certainly got reflected in the price action of the benchmark index. From a technical aspect, the bulls are being resilient to let loose their grip even in the overbought parameters which showcase their dominance. But at the same time, one should not become complacent and overrule the possibility of a breather post the steep rally.”

According to him, the 19,400-19,300 level may cushion any short-term blip, while the sacrosanct support lies around the bullish gap of 19,200 in the comparable period. On the flip side, as the index entered the uncharted territory there is no relevant hurdle. The next pitstop could be around 19,650-19,700 on an immediate basis.

Among sectors, the BSE Information Technology index jumped 5 percent, Metal index 3.2 percent and the Realty index 1.7 percent, while the Power index shed 2 percent.

The initial weakness in the domestic market was driven by anticipated soft earnings in the IT sector and negative cues from the US markets. An uptick in domestic food inflation, influenced by higher mandi prices trending above the Minimum Support Prices (MSP), and muted Kharif sowing, led investors to exercise caution.

Progression of the monsoon and the trend of Kharif sowing in July will be crucial factors in determining future inflation. Controlled inflation in the US has, however, instilled optimism among investors, who believe that a 25-bps rate hike would be sufficient to stabilise the US economy, said Vinod Nair, Head of Research at Geojit Financial Services.

“This positive outlook has contributed to strong buying in Indian IT stocks, despite muted Q1 earnings. Consequently, the US dollar and bond yields have fallen. The broader Indian market traded positively, reaching all-time high levels, on expectations of buoyant Q1 results, consistent FII inflows, decreasing wholesale prices, and low volatility (VIX). Among the sectors, Nifty Bank performed weaker as it started the earnings season on a low note. However, investors are eagerly awaiting more earnings reports in the coming week to determine their trading direction,” he said.

The BSE Small-cap index gained 1.7 percent with Zen Technologies, Lloyds Steels Industries, Pix Transmissions, Patel Engineering Company, Moschip Technologies, Mazagon Dock Shipbuilders, Precision Camshafts, HPL Electric & Power, Lloyds Metals and Energy, Xchanging Solutions, NELCO, Tejas Networks and Allied Digital Services rising 20-37 percent.

Losers included Delta Corp, Swan Energy, V2 Retail, RattanIndia Power, Heubach Colorants India, Mangalam Industrial Finance, Mangalore Chemicals and Fertilisers, Gulshan Polyols, Wardwizard Innovations and Mobility and AMI Organics.

In this week, Foreign institutional investors (FIIs) bought equities worth Rs 5,417.78 crore, while domestic institutional investors (DIIs) sold equities worth Rs 1251.29 crore.

In this month so far, FII sold equities worth Rs 14,582.63 crore and DII sold equities worth Rs 8,129.50 crore.

Where is Nifty50 headed?

Amol Athawale, Vice President – Technical Research, Kotak Securities

A spectacular rally in IT stocks following better-than-expected earnings from select frontline technology companies triggered a late upsurge, which propelled the Sensex to close above the 66,000 mark. The market seems to be flooded with strong FII inflows, and with US inflation moderating investors are hoping for a rate hike pause by the Federal Reserve later this month. On daily and weekly charts, the Nifty has formed a bullish candle along with breakout formation on intraday charts, which supports further uptrend from the current levels.

For the trend following traders now, 19,450 would be the trend-decider level and could move up till 19,800. Below 19,450, we could expect a one quick correction till 19,400-19,300.

For Bank Nifty, the 20-day SMA (Simple Moving Average) or 44,500 would be the trend-decider level. Above the same, the index could retest the level of 45,250-45,600. On the other side, below 44,500 the Bank Nifty could slip till the 50-day SMA or 44,000.

Ashwin Ramani, Derivatives & Technical Analyst, SAMCO Securities

The Nifty is likely to continue its uptrend now that 19,500 is taken out. The support for the Nifty now shifts to 19,400 from 19,300 after a strong closing on Friday.

Bank Nifty took support from the 20-Day Exponential Moving Average (DEMA), which is placed at 44,554. A close below 44,500 can trigger a fresh selling in Bank Nifty until 43,500, where its next visible support is placed. A decisive close above 45,000 can ignite buying interest in Bank Nifty.

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