Nifty MidCap And SmallCap Indices Extend Gains Amid Broader Market Rally

The Indian stock market witnessed a broad-based rally on March 18. The benchmark indices extended gains for the second straight session closing higher by over 1 per cent. The 30-share Sensex closed at 75,301.26 up by 1131.31 points or 1.53 per cent. The Nifty 50 index also closed higher by 325.55 points or 1.45 per cent at 22,834.3 levels.

The broader market indices also extended gains for the second straight session. The Nifty MidCap 100 closed at 49,516.9 levels up by 2.18 per cent and the Nifty SmallCap 100 closed at 15,374.7 levels up by 2.71 per cent.

In the two-session rally, the Nifty SmallCap 100 has gained over 3 per cent from the 14,897.35 level which the index hit on March 13. In the same time period the Nifty MidCap 100 has gained nearly 3 per cent from the 49,516.9 level.

How MidCap Stocks Fared

As many as 92 constituents of the Nifty MidCap 100 index advanced and 8 constituents declined on March 18. Gains made by Nifty MidCap heavyweights such as Max Healthcare, Indian Hotels Co Ltd and BSE Ltd pushed the index into the green territory. Notably, the three stocks closed up to 4.87 per cent higher. Max Healthcare Ltd which has the highest weightage among all Nifty MidCap 100 stocks closed higher at Rs 1,017.5 apiece, up by 1.96 per cent.

On the other hand shares of fintech giant Paytm Ltd (One 97 Communications Ltd) emerged as the top gainer among all Nifty MidCap stocks as it closed at Rs 741.65 apiece, up by 7.66 per cent. Earlier in the day the stock gained over 8 per cent to hit an intraday high of Rs 746.65 apiece on the NSE.

Bharti Hexacomm Ltd, Mangalore Refinery and Petrochemicals Ltd and Mankind Pharma’s shares emerged as the top drags among Nifty MidCap 100 stocks as they closed up to 2.46 per cent lower.

How SmallCap Stocks Fared

As many as 91 out of the 100 constituents of the Nifty SmallCap 100 advanced on March 18. Nine constituents of the index declined amid the broader market rally. The gains made by Multi Commodity Exchange of India Ltd, Blue Star Ltd and Laurus Labs Ltd pushed the index into the green zone. The three stocks closed higher by up to 6.32 per cent on March 18.

SmallCap stocks such as Raymond Ltd, Triveni Turbine Ltd and Finolex Cables Ltd gained the most on March 18. The three constituents of the Nifty SmallCap 100 index closed higher by up to 13.94 per cent. On the other hand shares of Atul Ltd, Castrol India Ltd and Aavas Financiers Ltd closed lower by as much as 2.18 per cent.

SmallCap and MidCap Correction

Despite the recovery made by the broader market indices in today’s trade, in the past six months, the MidCap and SmallCap indices have corrected drastically. Earlier in September, both the MidCap and SmallCap indices touched record highs. Notably both the indices have fallen nearly 20 per cent from their recent peaks. Typically if an index corrects over 20 per cent from the recent peak, it is said to be in ‘bear-territory’.

Various factors such as continued selling by Foreign Institutional Investors since September coupled with concerns regarding the valuation of SmallCap and MidCap stocks contributed to the decline. Additionally, uncertainty regarding the policies of the Trump regime such as the imposition of reciprocal trade tariffs have also contributed to the decline.

What Caused The Two-Day Rally

Devang Kabra, a fund manager at Wallfort PMS, told Outlook Money that the rally seen in the broader market had no specific triggers. However Kabra added that after correcting for six months certain stocks are seeming appealing to buyers at the current valuations, which in turn might have increased demand.

“At these levels, the buyers are comfortable to buy in large quantities and certain stocks seem to have reached the right valuations in the previous fall for the buyers to press the buy button,” Kabra said.

Kabra also said that despite the corrections, there are certain pockets of overvalued equities. He stated that as both smallcap and midcap stocks have corrected, it is likely that there might be ‘deep value’ in select stocks.

“From a price perspective, there are a few pockets of overvalued equities which will see correction and deservingly so. However, since some small and mid caps have taken a considerable beating in the past, there would be deep value available in few select names,” Kabra said.

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