Mid-, Small-Caps: Correction coming to an end; Time to buy, says Nuvama

Nuvama Institutional Equities, in report based on technical analysis, expects the Nifty MidCap to turn bullish above 48,100 and SmallCap above 15,400 levels.

Equity markets, the mid- and small-cap stocks, in particular have witnessed a correction in month of March, while the frontline stocks outperformed. The NSE MidCap 100 index so far this month has declined 2.1 per cent, and the Nifty SmallCap 100 has shed 5.8 per cent. In comparison, the Nifty 50 has gained 0.3 per cent.

Experts Analysts attribute to the correction in the broader market to profit-taking and valuation discomfort in select stocks. 

Having said that, Manav Chopra, Director - Technical Analyst of Nuvama Institutional Equities believes that the correction phase in the Mid- and SmallCap segment, is coming to an end, and recommends to initiate long positions.

The current scenario is a corrective phase in the ongoing bull market and has reached an oversold condition at key support levels and we recommend taking long positions, said Manav Chopra in a report.

The broader market, which was overheated, has seen a healthy decline and it appears that the price correction phase is over and will likely lead to a bottoming and a resumption of the bull phase, the report stated.

There continue to be strong tailwinds from global markets and with earnings season resuming in the coming weeks followed by general elections, markets are light on positions and offer a good risk premium for long positions. 

Technically, the analysts believe that the Nifty Midcap 100 index can turn bullish on breakout above 48,100. Similarly, the key pivot on the SmallCap index is seen at 15,400 levels.

At present, the Nifty Midcap quotes around 47,300 levels, while the counterpart SmallCap hovers around 15,050 levels.

  

The report explains that the Nifty Midcap100 index is in a correction phase and is almost 10 per cent below its recent high. In the past, such corrections have provided a good opportunity for long positions. SEE CHART

Further the Nifty Midcap100 weekly chart shows (CLICK TO VIEW) that the index has tested the rising trend line and formed a series of lower shadows along with an inside candlestick pattern. The RSI has found support in the bull market range and indicates a high probability zone for a reversal.

Further, on the daily scale, this chart shows the percentage of stocks above 50-DMA (Daily Moving Average) has tested oversold levels and led to an interim low in an ongoing bull market phase. SEE CHART

ALSO READ: Breakout stocks: SRF, Shoppers Stop can rally up to 10%, hint tech charts

Similarly, the Nifty SmallCap 100 weekly chart shows that long-term and medium-term trend remains bullish and the current decline has kept the primary trend intact. The emergence of the Hammer & Inside candlestick pattern indicates that an intermediate low is in place. SEE CHART

That apart, the Nifty 500 has held the 50-DMA on the daily chart and is currently trading above it. Mid & small cap will see a strong technical upgrade above the 50-DMA close. SEE CHART

Among individual stocks, the technical analyst at Nuvama Institutional Equities has recommended JSW Energy, Dixon Technologies, SAIL, IPCA Labs, PB Fintech and Oil India as the top picks in the MidCap space. Whereas, within SmallCaps, Apar Industries, BSE, Karur Vysya Bank, Triveni Turbine, Zensar Technologies and Data Patterns are his preferred stock picks.