These smallcaps log double-digit rise even as Sensex posts worst week in 1 month
Domestic equity benchmarks Nifty 50 and Sensex plunged sharply lower in the past week and lost more 2.5 per cent, the steepest such drop since the week ended September 22, mostly weighed by week global cues. The blue-chips bounced back by 1 per cent, in the final session on Friday, October 27, , snapping a six-day losing streak, supported by some healthy corporate results and value-buying in auto, IT, financial and energy stocks.
On Friday, Nifty 50 closed 190 points, or 1.01 per cent, higher at 19,047.25 while the Sensex closed at 63,782.80, up 635 points, or 1.01 per cent. Mid and smallcaps outperformed the benchmarks. The BSE Midcap index rose 1.70 per cent while the Smallcap index ended with a gain of 1.89 per cent on October 27.
IT stocks, battered in the past two weeks by weak corporate earnings, gained 1.24 per cent after data showed inflation cooled in the United States, a key market for IT companies.
Weekly Performance
Sensex and Nifty have slipped 3.18 per cent and 3.17 per cent in the last seven days. This week, all sectoral indices ended in red with media and metal declining the most.
In the broader markets, the domestically focused small- and midcaps have lost 5.1 per cent and 6.4 per cent, respectively in the past six sessions. However, they are still up 30 per cent and 23 per cent, respectively, so far this year, well above the Nifty’s 5.2 per cent increase.
In six trading sessions till October 26, Sensex had declined 3,279.94 points. The domestic market has been under pressure in October because of foreign capital outflow, unimpressive July-September quarter results, record-high US bond yields and Middle East tensions. Nifty 50 is down about 3 per cent this month so far.
US bond yields surged to 17-year high mark at 5 per cent as Federal Reserve Chairman Jerome Powell said earlier this month that more interest rate hikes may be required to bring inflation down to a 2 per cent target because of a tight labour market and resilient US economy. The 10-year US treasury yields rose 3 basis points (bps) to 4.845 per cent after scaling 5 per cent earlier in the week.
On the stock-specific front, 10 smallcap stocks logged gains in the range of 10 per cent – 25 per cent last week, outperforming the index. Bombay Bumrah, Black Box, Sadhana Nitro, Angel Broking, CreditAccess Grameen, Swan Energy, Ramco Industries, Voltamp Transformers, KDDL, and Styrenix Performance are among the smallcaps that logged a double-digit rise in their share prices last week.
Where are markets headed?
Market experts highlighted that the frontline indices ended a three-month long consolidation phase, with the tone being bearish for most of the week but some losses were trimmed in the final session. “The correction in small- and mid-caps over the last week is still puny compared to the rally over the past six to seven months,” said analysts at Kotak Institutional Equities.
Analysts say that decent Q2 results in India, which were in line with optimistic estimates, may also support the market’s rebound. ‘’However, the volatility of the global market is expected to delay the recovery trend of the domestic market, since the global market is focused on the risk of further slowdown of the global economy due to elevated interest rate and geo-political tension,” said Vinod Nair, Head of Research at Geojit Financial Services.
Amidst the ongoing market consolidation, sectors such as FMCG, consumption, fertilizers, and core segments like infrastructure, housing, are expected to present potential growth opportunities.
‘’While US Fed’s rate decision on Wednesday will be a key event, investors would also await BOJ’s meeting outcome on Monday amid high global bond yield. We expect market to continue with its volatile move going forward ahead of key economic events and ongoing earning season,” said Siddhartha Khemka, Head – Retail Research, Motilal Oswal Financial Services.
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Updated: 28 Oct 2023, 08:52 PM IST
