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Micro, small, midcap indices outrun Nifty 50 in recent market pullback
While the Nifty Microcap 250 index has rallied around 6 per cent from its closing level on Friday, May 9 till May 13, the Nifty Smallcap 100 and the Nifty Midcap 150 indices have moved up 5 per cent and 4 per cent respectively during this period, shows ACE Equity data. In comparison, the Nifty 50 index has gained 2.4 per cent. (See graphic below) The outperformance in a lot stocks from the micro, small-and midcaps, said Kranti Bathini, Director-Equity at WealthMills Securities, has been on account of a positive earnings surprise in the March 2025 quarter (Q4-FY25).
'Mid-and smallcaps had been in a consolidation phase since long. Q4FY25 earnings for a lot of companies in these segments surprised positively, which triggered an up move. Though one cannot paint the entire sector with the same brush, it is advisable to take some profit off the table right now. Valuations for some of the stocks in the micro, small-and midcap baskets is still steep and prone to a correction. One has to be stock specific from here on,' he said.
Microcap, Midcap, Smallcap indices
At the stock level, Tanla Platforms, Syrma SGS Technology, Bharat Dynamics, Olectra Greentech, Nippon Life India Asset Management, The Jammu & Kashmir Bank, Reliance Power and Escorts Kubota gained between 11 per cent and 19 per cent during the recent market pullback, data shows.
K.P.R. Mill, Jyothy Labs, United Breweries, Navin Fluorine International, Chambal Fertilisers and Chemicals and UPL Ltd., on the other hand, lost ground.
The Nifty 50, according to analysts at IDBI Capital, is trading near one standard deviation above its 10-year average based on one-year forward earnings per share (EPS) estimates.
'In the absence of strong domestic catalysts and amid external policy risks, we expect the market to remain range-bound in the short term. As a result, we anticipate a more stock-specific environment going forward, where select stocks will outperform,' wrote Pravin Bokade and Shreejit Nair of IDBI Capital in a recent note.
Technical view on the markets
Those at Angel One, too, remain constructive on the markets and suggest investors adopt a 'buy on dips' strategy. Technically, considering the retracement of Monday's rally (from Friday's low), the 61.8 per cent level around 24330, which also marks the start of the bullish gap left, is seen as a crucial support for the Nifty 50 index now.
A breach below this level could see the ongoing up-move fizzle out. The 50 per cent retracement at 24,450 levels serves as immediate support for Nifty 50.
"On the upside, 24750 and 24900 are the key resistance levels to watch. Traders can continue to focus on mid-and small-caps, but should adopt a selective approach," advises Sameet Chavan, head of research for technical and derivatives at Angel One.
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