Market Declines 3% Amid Weak Cues But These 31 Smallcap Stocks Gain 10-40%

Indian benchmark indices shed 3 percent in the week ended December 17 amid volatility on the back of rising omicron cases, continuous FII selling and hawkish stance of major central banks.

Last week, BSE Sensex declined 1,774.93 points (3 percent) to finish at 57,011.74, while the Nifty50 fell 526.1 points (3 percent) to close at 16,985.2 levels.

On the sectoral front, BSE Realty index slipped over 7 percent, Telecom index lost 5.4 percent and FMCG index fell 4.5 percent.

Among broader indices – BSE Midcap index declined 4.5 percent, while the Smallcap index shed 2.7 percent.

However, 31 smallcap stocks including Suvidhaa Infoserve, Borosil, Precision Wires India, Urja Global, Tata Teleservices (Maharashtra), Brightcom Group, Saint-Gobain Sekurit, Dhanvarsha Finvest and Butterfly Gandhimathi Appliances gained 10-41 percent.

Meanwhile, more than 3 stocks slipped 10-19 percent including Network 18 Media & Investments, Aurum Proptech, Gujarat Fluorochemicals, Hindustan Construction Company, Reliance Industrial Infrastructure, DB Realty and Reliance Communications.

“Indian equity markets declined as Omicron concerns increased on rise in cases in the UK, while central banks of developed markets acknowledged the need for policy actions at the face of persistent inflation. Investors favoured IT services and capital goods companies,” said Shrikant Chouhan, Head of Equity Research (Retail), Kotak Securities.

“On the economy front, the US Fed stated that it would accelerate the reduction of its monthly bond purchases while projections indicated that it may raise rates thrice in CY2022. Meanwhile, the BoE raised its rates by 15 bps in its policy meeting, while the ECB further cut its bond purchases.”

“FPIs bought equities worth USD 325 mn over the past five trading sessions while DIIs bought US$592 mn worth of equities in the same period on a net basis,” Chouhan added.

BSE Midcap index shed 4.5 percent, dragged by Shriram Transport Finance Corporation, IDBI Bank, Vodafone Idea, Cholamandalam Investment and Finance Company, Godrej Properties and Mahindra & Mahindra Financial Services.

The BSE 500 index slipped 3 percent dragged by Network 18 Media & Investments Gujarat Fluorochemicals, Shriram Transport Finance Corporation, IDBI Bank, Hindustan Zinc, Vodafone Idea, Indian Energy Exchange and Suzlon Energy.

However, Bajaj Electricals, Swan Energy, KPR Mill, Vardhman Textiles and Minda Industries added 10-17 percent.

“In the last week, the Benchmark indices witnessed selling pressure, the Nifty ended 2.97 percent lower while the Sensex was down by nearly 3 percent. Last Monday, the index opened with a gap up but once again it failed to trade above 17550/59000 resistance zone. And due to uncertain global cues and consistent profit booking at higher levels, it corrected sharply,” said Amol Athawale, Deputy Vice President – Technical Research, Kotak Securities.

“Technically, on weekly charts, the Nifty has formed a strong bearish candle which is largely negative. In addition, on daily charts, the index has broken the important support level of 17000 and succeeded to close below the same. Further, on daily and weekly charts it maintained lower top formation which indicates a continuation of weakness in the near future,” he added.

Where is Nifty50 headed?

Palak Kothari, Research Associate at Choice Broking

Nifty has given a breakdown of rising trendline as well as trading below 21&50-DMA, which adds bearish momentum for the next day. A momentum indicator Stochastic suggested negative crossover on the daily time-frame, which confirmed a bearish move for the upcoming session.

At present, the index has support at 16900 levels, while resistance comes at 17300 levels. On the other hand, Bank Nifty has support at 35300 levels while resistance at 36600 levels.

Rahul Sharma, Co-owner, Equity 99

We see the next major support for Nifty at 16800 levels, which will act as a crucial point. But if Nifty breaches that level, major slide of 400 points will be seen till 16400 levels.

On the positive side, we see that these could be the last blow to the market and expect some upward move next week. Smallcaps and Midcaps might lead the recovery. Investors are advised to hold on and not panic. We continue to recommend ‘buy on dips’ strategy.

Ajit Mishra, VP – Research, Religare Broking

Apart from the policy tightening, a sharp rise in COVID cases globally has renewed participants’ worries and we feel it may aggravate further in the absence of any major positives.

On the index front, Nifty is likely to retest the previous swing lows and the 16,900-16,700 zone would be critical. Participants should align their positions accordingly and prefer hedged bets.

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