Mid-cap investors pin hopes on Samvat-2076

Hyderabad: After a sluggish Samvat-2075 and Samvat-2074, small-caps and mid-cap stocks may witness an upswing during Samvat-2076, beginning from Diwali on Sunday (October 27, 2019), forecast technical analysts.

The possible rebound in mid and small stocks may give good returns to investors. However, this would be subject to stock-specific movement.

Despite an 11 per cent rise in the BSE Sensex, investors of mid-cap and small-cap stocks suffered during the just concluded Diwali accounting year of Samvat-2075. The midcap index fell 2.1 per cent, and the small-cap index declined 15.6 per cent. Mostly, the erosion of liquidity impacted the mid-cap and small-cap stocks, while the BSE Sensex concluded Samvat-2075 at 39,058.06 points, a net growth of 11.6 per cent. The market capitalisation (Mcap) rose by Rs 8 lakh crore to Rs1.49 lakh crore on the BSE. NSE Nifty rose 10 per cent to 11,583.90 points. During the Samvat-2075, gold rose to 20 per cent, and the India rupee was 3.5 per cent up against the US dollar.

The stock markets witnessed a mixed bag during the Samvat-2075 as the Centre imposed a tax surcharge on super-rich investors. The tax surcharge impacted FPIs, corporate mergers, etc. A cut in corporate tax brought a breather for Corporate India.

Further short-coverings by Call writers likely

Coming to derivatives trading, the options data may range between 11,500-11,800 levels for the first week of Samvat-2076 (October 29-November 1). There would be no trading on Monday on account of Diwali Balipratipada.

“Indian markets remained volatile in the last week with Nifty ending in the midst of marginal losses while Bank Nifty closed with nearly one per cent gain. During the week, majorly stock-specific action remained under focus,” observes Mr Dhirender Singh Bisht, senior research analyst (derivatives) at SMC Global Securities Ltd.

“On the derivative front, the tug of war was seen among bulls and bears as call writers at 11,600 strike, while Put writers at 11,500 strike majorly kept the markets volatile. On the higher side 11,650 levels should act as an immediate hurdle for Nifty above which we can witness further short covering from Call writers towards 11,700 to 11,750 levels in the coming sessions,” said Mr Bisht.

Shedding 240.32 points or 0.61 per cent for the week ended October 26, 2019, BSE Sensex closed at 39,058.06 points from the previous close of 39,298.38 points. NSE Nifty ended at 11,583.90 points, a net loss of 77.95 points or 0.66 per cent, as against the previous close of 11,661.85 points.

Mr Bisht forecasts that “from the technical front, however, we expect that volatility is likely to grip the market and any dip should be used to create fresh longs. Nifty and Bank Nifty both the indices are comfortably trading above its short and long-term moving averages which suggest that the current trend is likely to continue towards the upside.”

The derivatives trading recorded stock-specific action whereas the implied volatility (IV) continued to remain choppy after reaching the 18 per cent mark in the October F&O series.

“The Implied Volatility of Calls was up and closed at 14.90 per cent, while that for Put options closed at 15.85 per cent. The Nifty VIX for the week closed at 16.24 per cent and is expected to remain volatile. PCR OI for the week closed at 1.03, which points towards Put writing and is positive for markets.

Bank Nifty rose points or per cent, to end the week at points as against previous week’s close of 29,120.25 points.