Over 40 smallcap stocks gain 10-30% as Sensex hits 11-week high on macro data, FII inflows; do you own?

On the stock-specific front, Asian Energy Services, 63 Moons Tech, India Cements, Tanfac Industries, HBL Power, Shalimar Paints, Poonawalla Fincorp, Dixon Technologies, Reliance Infra, MTNL, Bharat Dynamics, Chennai Petroleums, Finolex Cables, NBCC (India), Carysil, and others are among the smallcaps that logged a double-digit rise in their share prices last week.

Markets’ Weekly Print

Domestic equity benchmark Nifty 50 hit fresh record highs logging its best week in five months as strong macroeconomic data, continuous foreign fund inflows added to optimism over the global interest rate outlook. The midcap index also ended at a record high for the 15th consecutive session. Out of the 50 Nifty stocks, 31 showed gains since the last record high on September 15, 2023.

Sensex hit its 11-week high, closing at the highest closing level since September 18, and logged its fifth straight weekly gain, along with Nifty 50. The blue-chips Nifty 50 and BSE Sensex gained 2.39 per cent or 473.2 points and 2.29 per cent or 1,511.15 points, respectively, led by a rise in energy stocks.

Also Read: Axis Securities initiates coverage on smallcap stock with ‘buy’ rating, sees 40% upside; do you own?

Favorable global cues triggered an upbeat start, which further strengthened with rotational participation from the index majors, especially from the banking and financial pack. All 13 major sectors logged gains for the week, while the more domestically-focused small- and mid-caps extended their outperformance over the blue-chips. 

Oil & Gas index rose 4.38 per cent, and was the top weekly sectoral gainer, aided by a drop in crude oil prices as production cuts agreed by the Organisation of Petroleum Exporting Countries and its allies (OPEC+) were below market expectations.

Vinod Nair, Head of Research at Geojit Financial Services, said “The market soared to new heights this week, decisively breaching the key resistance level and closing strongly above 20,000 levels. Global markets witnessed a bullish trend, buoyed by expectations that the European Central Bank has concluded its rate-hiking cycle amid a backdrop of easing inflation.”

‘’The broader market outperformed, with mid and small caps displaying resilience and no signs of fatigue. Investors remain optimistic about government spending and heightened consumption, driven by easing inflation, propelling growth in H2FY24,” added Nair.

The Nifty Smallcap 100 index jumped 12 per cent in November while the benchmark Nifty 50 rose 5.5 per cent. On the other hand, the Nifty Midcap 100 index rose 10.4 per cent in November. In 2023, the Nifty is up 12 per cent, the Nifty Midcap is up 38 per cent, and the Nifty Small Cap is up 46 per cent.

Previous Session

On Friday, the domestic equity market achieved record-high levels, starting December on a bullish note over all-round buying, after India’s July-September quarter gross domestic product (GDP) data exceeded expectations.

The benchmark Nifty 50 hitting its fresh record high of 20,291.55 -up 158.4 points or 0.78 per cent, during the intraday session. Nifty 50 closed 135 points, or 0.67 per cent, higher at 20,267.90 on Friday.

Sensex ended the day at 67,481.19, up 493 points, or 0.74 per cent. Sensex remained 446 points away-less than 1 per cent shy, from its all-time high of 67,927.23 which it hit on September 15 this year.

Mid and smallcap indices also hit their fresh record highs during the session. The Nifty Midcap 100 index hit its record high of 43,469.30 while the Nifty Smallcap 100 index scaled its fresh peak of 14,305.10.

The Nifty Midcap 100 index closed 1.10 per cent higher at 43,382.40 and the Nifty Smallcap 100 index closed 0.48 per cent higher at 14,239.30. BSE Midcap index closed 0.96 per cent higher at 34,586.76 after hitting its fresh record high of 34,631.35 during the day. The BSE Smallcap index ended with a gain of 0.48 per cent at 40,565.96 after hitting its record high of 40,718.81 during the session.

Also Read: FIIs make a stellar comeback! Turn net buyers in last 6 sessions with net inflow of 13,474 crore; DIIs left behind

What’s driving the rally?

Firstly, the Indian economy grew 7.6 per cent during Q2FY24, remaining the fastest-growing major economy in the world. India’s Q2 GDP growth came sharply above D-Street estimates as well as projections by the Reserve Bank of India.

Secondly, exit polls of the five state elections have indicated political stability ahead of the General Elections 2024. Emkay Global Securities said that a decisive BJP win will reinforce the consensus view that the party is on the front foot for the 2024 general elections. This will likely add a further leg of the rally to the markets as policy continuity will be viewed as a positive growth shock in the medium term.

Thirdly, FIIs have made a stellar comeback as they emerged as net buyers of Indian equities for the six straight sessions and pumped a total of 13,474 crore during these days.  Foreign portfolio investors (FPIs) also snapped a two-month selling streak in November as the net inflow stood at 9,001 crore, compared to over 39,000 crore worth of shares sold in September, October.

Finally, The US market showed almost 10 per cent rallies only in the month of November. US 10-year bond yields and the dollar index are also cooling off, which gives strength to the market. These factors will be closely monitored, as they have the potential to influence market sentiment.

Where are markets headed?

The state assembly elections’ results for Madhya Pradesh, Chhattisgarh, Rajasthan, Telangana, due on December 3, could trigger near-term volatility in the markets, said analysts. Mizoram results will be declared on December 4.

‘’The upcoming state polls are being considered a semi-final before the 2024 assembly elections. A stable political environment could boost investor confidence and drive the market higher. If the election outcome is not favorable, then we can expect a fall of 1-2 per cent in the market, but that will be a buying opportunity as the market will look for the general election in 2024,” said Pravesh Gour, Senior Technical Analyst, Swastika Investmart Ltd.

Most exit polls on Thursday put the BJP ahead in Madhya Pradesh and gave it an edge in Rajasthan while predicting that it was an advantage for Congress in Telangana and Chhattisgarh.

“While state elections are largely a non-event for equity markets from a long-term perspective, there might be some sharp reaction early next week,” said Pramod Gubbi, founder of Marcellus Investment Management.

‘’The good news is that the short-term technical outlook for Nifty continues to be in favor of the bulls, with support seen at 20089-19909 and resistance at 20,500-20,751,” said Prashanth Tapse, Senior VP (Research), Mehta Equities Ltd.

Ajit Mishra, SVP – Technical Research, Religare Broking Ltd said, ‘’We are eyeing the 20,500-20,750 zone in the Nifty and expect the index to hold the 19,850-20,050 zone, in case of any profit taking. While all the sectors are contributing to the move, a catch-up move in banking, FMCG and IT pack may result in selective outperformance so align your trades accordingly.”

‘’Though the broader indices have been consistently beating the benchmark, we feel it is now time to be careful in stock picking in midcap and smallcap space and prefer high quality names,” added Mishra.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.

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Updated: 02 Dec 2023, 08:39 PM IST

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