As many as 8 stocks from the S&P BSE 500 index rallied over 20 percent in the last five trading sessions.
Indian markets created history last week with both benchmark indices rallying over 2 percent each. The S&P BSE Sensex gained 840 points or 2.3 percent while the Nifty50 rose 268 points or 2.43 percent for the week ended 27 July.
The benchmark indices might have risen by a little over 2 percent but nearly 30 stocks on the BSE rose 20-40 percent in the same period.
As many as 8 stocks from the S&P BSE 500 index rallied over 20 percent in the last five trading sessions which include names like Inox Wind, Vijaya Bank, Prism Johnson, Dilip Buildcon, REC, Shriram Transport Finance, Reliance Capital, and Jindal Saw.
21 companies from the S&P BSE smallcap index rose 20-40 percent for the week ended July 27 which include names like JMT Auto, Metalyst Forging, Shree Renuka Sugars, Everest Industries, Monnet Ispat, Alok Industries, Punj Lloyd, Uttam Galva, A2Z Infra, and Atlanta Ltd.
Apart from record highs, the key positive takeaway for investors was the rally in the small & midcaps which were showing divergence in the past 2-3 months.
The S&P BSE Midcap index rose 4.7 percent while the S&P BSE Smallcap index gained 4.6 percent for the week ended July 27.
Some investors are raising the concern that if the broader market keeps on underperforming the rally which we are witnessing in the largecap space might not last for long. However, experts feel otherwise.
Data suggests that the broader market is under extreme pressure with worst performer being the real estate sector which is still trading below 85 percent to its lifetime highs and second-worst performer is the Infra index which is still trading 50 percent below its lifetime high.
“Just because these indices are lagging behind doesn’t mean that pivotal indices like Nifty and Sensex should falter from new lifetime highs and the rally shall prematurely terminate without much progress,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.
“Technically speaking, broader markets shall get strengthened further and catch up momentum once Nifty 500 which is a broader gauge of the market pulse registers a fresh breakout beyond lifetime highs,” he said.
On a year to date basis, the Sensex is now given a return of 9.6 percent while the Nifty rose by over 7 percent. The broader market has underperformed sharply during the same period. The BSE Midcap Index fell by 10.7 percent and the BSE Smallcap Index dropped 14.4 percent in the same period.
“We believe that this divergence between large and mid-caps may continue for some more time. Mid-caps still trade at a premium of 20-25% to the Nifty in terms of P/E and thus, could be vulnerable in a volatile market,” Siddharth Khemka, Head- Retail Research, MOSL told Moneycontrol.
“Some of the factors that can affect investor sentiments are crude oil prices, interest rates, the progress of monsoon, political developments, continued selling by FIIs and global cues on trade wars,” he said. Overall, Khemka likes Private Financials, Consumer Discretionary (Auto and Speciality Retail), FMCG, IT and select quality Mid-caps.
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