Mid- & small-caps can rise further, but some on Street wary

Synopsis

All three indices are up between 4.7% and 5.2% in the last three days, against the 2.25% upmove in the benchmark Nifty 50. The nervous sentiment in the domestic market has eased of late, tracking the improved mood globally, also with selling by foreign investors subsiding.

Mumbai: The recent bounce in mid-cap and small-cap shares may have more legs in the days ahead. Short-term technical indicators are pointing to a further run-up of 5% in their indices after having gained roughly 5% in the previous three trading sessions though market participants are doubtful whether the recovery is more permanent after the sharp sell-off in the previous six months.

On Wednesday, the Nifty Midcap 150 index was up 2.37%, Small-cap 250 rose 2% and Microcap 250 gained 2.2% at close. All three indices are up between 4.7% and 5.2% in the last three days, against the 2.25% upmove in the benchmark Nifty 50. The nervous sentiment in the domestic market has eased of late, tracking the improved mood globally, also with selling by foreign investors subsiding.

Agencies

"With the recent fall in the dollar index from 110 to 103 levels, and FIIs covering shorts and turning buyers on Tuesday, we have seen some pullback move in the market," said Ruchit Jain, vice president at Motilal Oswal Financial Services. "The entire market breadth has turned positive, and we have seen the small-cap and mid-cap indices close above their 20-Day Simple Moving Average, which is an important short-term market indicator."

Jain is betting on an upmove of 3-5% in these indices in the short term.

From September 27, when the market decline started, to March 3 - the start of the current bounce back, the mid-cap 150 index had fallen 20.5%, small-cap 250 was down 25.4% and micro-cap 250 declined 25%.

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