People look at a screen displaying the Sensex results on the facade of the Bombay Stock Exchange (BSE) building in Mumbai.  (Reuters)
People look at a screen displaying the Sensex results on the facade of the Bombay Stock Exchange (BSE) building in Mumbai. (Reuters)

Nifty could extend gains, midcap outperformance may continue: Analysts

  • Market experts say that while Nifty could possibly head higher the outperformance in midcap and smallcap stocks can continue for a while
  • Indian rupee today closed near two-month high against US dollar after local equity markets gained for second consecutive sessions

NEW DELHI : Indian markets started the week with a bang. After a weak start, benchmark indices Sensex and Nifty gained momentum as the session progressed, ending near one-month closing highs. Sensex rose 378 points to settle at 36,442 while Nifty edged closer to 11,000 mark, ending at 10,987, up 1.14%. Buying was broad-based across all sectors, barring some profit-taking in IT stocks.

The broader markets continued their outperformance for fourth straight session with BSE midcap and smallcap ending with healthy gains of 2% and 3.1% respectively.

Market experts say that while Nifty could possibly head higher the outperformance in midcap and smallcap stocks can continue for a while.

Sameet Chavan, chief analyst for technical and derivatives at Angel Broking, says a move towards 11300–11350 cannot be ruled out in days to come, citing “encouraging signs on daily chart."

“Traders are advised to trade with a positive bias and expect 10940-10817 to act as a strong support zone now," he advises.

Investors today looked beyond US President Donald Trump’s plans to end key trade benefits for India that allows duty-free entry for up to $5.6 billion worth of exports to America.

“Positive services PMI data, rupee gains and positive European cues boosted the sentiments," says Jayant Manglik, president of retail distribution at Religare Broking.

Indian rupee today closed near two-month high against US dollar after local equity markets gained for second consecutive sessions.

Also supporting the market sentiment, data released today showed activity in India's huge service sector accelerated in February, partly due to an increase in domestic new business which induced firms to maintain a solid hiring pace, a private survey showed on Tuesday. The Nikkei/IHS Markit Services Purchasing Managers' Index rose to 52.5 in February from January's 52.2, staying above the 50-mark that separates growth from contraction for a ninth straight month.

Jayant Manglik of Religare Broking says Indian markets may extend in the coming sessions but he urged investors to remain cautious at higher levels.

“Domestically, the extent of geopolitical risk between India and Pakistan will be closely monitored. Any re-escalation in tension in the coming days could be negative for Indian equities. Globally, the developments on US-China trade front, progress on Brexit and movement of crude oil prices and currency would be actively tracked by the investors," he says.

“Considering high volatility, traders should avoid taking any risky leveraged positions."

Devang Mehta, head of equity advisory at Centrum Wealth Management, says that value-buying seems to be emerging in midcap and smallcap stocks, which have underperformed in recent months vis-à-vis largecaps.

“The buoyancy in the market sentiment is clearly evident from last few sessions, where mid and small caps have come to the fore and started to outperform. The premium valuations of mid and small caps vis-a-vis large caps, post correction have normalized and hence value buying seem to be emerging," he said.

“With corporate India’s balance sheet deleveraged in the last couple of years, capacity utilizations rising, corporate profit to GDP bottoming out and in a low inflation and low interest rate environment, quality large, mid and even small caps which corrected due to technical reasons or subdued sentiment can come back on the investor radar and portfolios," he said. 

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