If Monday was all about the Nifty 50, Tuesday was all about the Midcaps and Smallcaps. As fast as these stocks went higher, they came off those highs on Tuesday equally fast if not more.
93 and 96 out of 100 are impressive scores in any competitive exam. But these are certainly not impressive numbers if they are the number of stocks on the Midcap and Smallcap index respectively that ended with losses on Tuesday.
Both the broader market indices ended the day with their biggest drop of 2023. This, despite analysts like Mark Matthews telling CNBC-TV18 that the planets are aligned for India and that the markets can move even higher from these levels.
Is There More Pain For The Broader Markets?
Dinshaw Irani of Helios Capital still finds value in smallcap stocks, although he would prefer staying away from midcaps.
"The smallcap is an ocean. I think that's where the value lies today. Beyond the index, but obviously, the way the money was flowing into these sector specific stocks, in mutual funds, that's why you're seeing this kind of frothiness in index specific stocks as such. So I would rather stay away from the midcaps - smallcaps there is still a lot of flavor left," he said.
On the other hand, Devang Mehta of Spark Private Wealth Management does not see much downside except for any unforeseen event.
"One needs to be a bit cautious, caution has to be raised on the valuation front but overall, I don't think there is much downside here except for any six sigma event, which nobody knows about. But I don't see a huge correction that should be on the anvil because of just 20,000 as a psychological mark being reached, it's just a milestone in the journey according to me," he said.
"Overall, we expect the focus to shift from mid and small caps to large caps in the near term, as investors may turn cautious on the broader market," said Siddhartha Khemka of Motilal Oswal.
What Do The Nifty 50 Charts Indicate?
The Nifty 50 ended little changed in Tuesday's session, although it failed to hold on to the 20,000 mark for the second day in a row. The divergence between the Nifty 50 and the broader market on Tuesday was the highest since April 2020.
Rahul Sharma of JM Financial believes that 19,800 or maybe 19,650 levels on the Nifty 50 in the best case scenario would be good re-entry levels for the rest of the month. "I think this is still a bull market and a very strong primary uptrend. "So clearly look to re-enter at key suppport levels and book profits in the midcaps and smallcap indices where a phenomenal rally has taken place over the last few weeks," he said.
Interestingly, Sharma was the first chartist to projet a 1,000-point rally on the Nifty 50 index in the September F&O series.
Atul Suri of Marathon Trends PMS said that the market is nowhere near the bubble territory. With the Nifty 50 having risen only 15-16 percent on a two-year basis, he said there is no reason why the index cannot have another 8-10 percent rally this year. "We are currently midway in the market upcycle," Suri said.
What are the F&O Cues Indicating?
Lets take a look at the stocks which saw fresh short positions on Tuesday, meaning a decrease in price but increase in Open Interest:
StockPrice ChangeOI ChangePower Grid-3.58%53.76%Laurus Labs-6.85%23.41%Coromandel-1.45%19.81%L&T Finance Holdings-3.54%15.58%Bharat Electronics-6.73%15.24%Here are the stocks that saw unwinding of long positions on Tuesday, meaning a decrease in both price and Open Interest:
StockPrice ChangeOI ChangeBHEL-10.32%-18.46%PFC-7.60%-5.32%Dixon Technologies-2.30%-4.55%Persistent Systems-1.57%-4.40%Tata Consumer Products-0.68%-4.08%What Next For the Nifty & Nifty Bank?
"Technically, the medium-term texture of the market is still positive, but in the near future, we could see rangebound activity," said Shrikant Chouhan of Kotak Securities. He sees 19,900 - 19,850 as key support levels for the Nifty 50 bulls, while 20,100 - 20,150 will act as resistances on the upside.
Rupak De of LKP Securities said that put writers on the 19,900 strike prevented the Nifty 50 from further declines. Over the short-term, the Nifty 50 is expected to maintain its strength as long as it remains above 19,780, while a decisive move above 20,100 - 20,150 can propel the index towards 20,500.
The Nifty Bank index ended little changed on Tuesday, still managing a close above the 45,500 mark.
Call writers have significantly increased Open Interest at the 46,000 strike of the Nifty Bank which will not act as a strong resistance, said Kunal Shah of LKP Securities. On the downside, support is seen at levels of 45,200, holding which, a recovery towards 45,600 - 45,800 could be seen on the index.
Here are the stocks to watch out for ahead of Wednesday's trading session:
Foreign investors were net sellers in the cash market on Tuesday, while domestic investors remained buyers.
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