Market Wrap: Sensex, Nifty extend rally for third straight session; small, midcaps outperform

Domestic benchmark equity indices finished higher for the third consecutive session on Tuesday amid positive domestic macroeconomic data. Mid-caps and small-caps outperformed the blue-chips setting new highs.

The 30-share BSE Sensex ended higher by 152.12 points or 0.23% 65,780.26 level while the Nifty also closed at 19,574.90 level, up 46.10 points or 0.24%.

India’s services activity continued to expand in August, but at a slower pace than in July. The services purchasing managers' index (PMI) fell to 60.1 in August from 62.3 recorded in July, according to data released by S&P Global on Tuesday. 

The Nifty Midcap 100 index gained a percent to hit an all-time high, riding past 40,000-mark on Tuesday led by a strong bullish momentum in midcap stocks.

Also Read: India’s services PMI falls to 60.1 in August from 62.3 MoM

The Nifty Smallcap 100 index has increased by more than 30%, while the Nifty Midcap 100 index has increased by more than 27% so far this year. Both indices have performed much better than the benchmark Nifty, which has increased by 8% during the same time period.

Also Read: Nifty Midcap 100 hits life-time high; Chalet Hotels, Nazara Technologies among key midcap stocks to watch out for

"The Nifty Midcap index crosses the psychological 40,000 mark, gaining nearly 35% in the last six months, while the smallcap index soars above the 12,000 mark to capture around 40% gain since March 2023. Despite this humongous gain in prices in such a short span of time, we are still more optimistic about both indexes as growing risk appetency will continue to buoy both segments.

Following the improving economic health and domestic developments, investors turned to midcap and smallcap stocks as they are often more closely tied to economic growth than large-cap stocks and offer lucrative returns. Apart from that, improving liquidity in these stocks further fuels investor's confidence to invest more in midcap and smallcap sectors," said Arvinder Singh Nanda, Senior Vice President, Master Capital Services Ltd.

Top Nifty gainers and losers today

As many as 33 stocks ended in the green while the remaining 17 stocks ended in the red in the Nifty index.

Shares of Apollo Hospitals Enterprise Ltd (up 3.22 per cent), Coal India Ltd (up 3.07 per cent) and Sun Pharmaceutical Industries Ltd (up 2.08 per cent) ended as the top gainers in the Nifty index.

On the flip side, shares of Ultratech Cement Ltd (down 1.49 per cent), Dr Reddy's Laboratories Ltd (down 1.40 per cent) and SBI Life Insurance Company Ltd (down 1.31 per cent) ended as the top losers in the Nifty pack.

Sectoral indices today

Except for Nifty Bank (down 0.10%), Nifty Auto (down 0.01%), and Nifty Financial Services (down 0.17%), all the other sector ended in green on Tuesday's session. 

Nifty PSU Bank index hit a record high of 4,722, up 1%. Nifty media which jumped 3.19% followed by Nifty healthcare that rose 1.55%, Nifty Pharma that gained 1.10%, and Nifty Realty which rose 1.06%.

Nifty FMCG, Nifty IT, Nifty Media, and Nifty Metal gained 0.5% to 0.7%.

Experts’ views on markets

“Strong domestic factors are providing crucial support for Indian equities, allowing them to maintain their strength despite attempts by weak global peers to disrupt the mood. India's service PMI remains robust at 60.2, indicating sustained demand even in the face of inflationary pressures. 

Notably, small and mid-cap stocks have been standout performers, with both indices reaching all-time highs. Conversely, the weak Chinese service PMI has cast a shadow on hopes of an economic rebound in China, impacting global market sentiments,” said Vinod Nair, Head of Research at Geojit Financial Services.

According to Prashanth Tapse, Research Analyst, Senior Vice President of Research at Mehta Equities, Nifty held on to gains for the third straight day as winds continue to blow in the bulls’ sails. That said, strong follow-through buying was however missing albeit lack of positive Asian cues.

The positive takeaway from today’s trading session was that the benchmark Nifty sticked to gains as Nifty Mid-cap and Small-cap indices continue to scale fresh all-time-highs. Strictly speaking, risk mood has improved after Friday’s softer than expected US August payrolls report suggests that September rate hike is off the table.

"Nifty’s biggest support for Wednesday’s trade will be at 19,389 mark. The technical landscape will shift to positive if Nifty manages to trade above 19,757 mark. Technically speaking, bulls will be in control only above Nifty 19,757 mark," added Tapse.

Technical views on Nifty

"Nifty has sustained a breakout from a descending channel on the daily chart. The trend will remain favorable as long as the bulls can maintain Nifty above 19,440. A "buy on dips" strategy should be the preferred approach until Nifty falls below 19,440. Resistance on the upper end is positioned at 19,600, and if breached, the index could potentially move higher," said Rupak De, Senior Technical analyst at LKP Securities.

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