Shares of the Mid and Smallcap companies were outperforming in an otherwise flat market on Wednesday, May 7. The Smallcap and Midcap indices, which initially dropped nearly 1.5 per cent, reversed their losses and were now trading with gains of over 1 per cent each.
The Nifty MidCap100 index rallied 2.87 per cent from the intra-day low to 54,242.4, while the Nifty SmallCap250 index climbed 2.71 per cent from the day’s low to an intra-day high of 16,373.6 levels on Wednesday.
BSE leads the rally
From the Midcap basket, BSE led the gains among the Nifty Midcap100 constituent stocks, trading higher by 8.64 per cent, followed by One 97 Communications, the parent company of Paytm, with a 7 per cent rise, at around 12 PM on Wednesday. Muthoot Finance, SRF, and Aditya Birla Fashion were among the other gainers that traded higher by over 3 per cent each.
Meanwhile, from the Smallcaps space, Welspun Living logged the highest demand, trading higher by 13 per cent. This was followed by Piramal Enterprises (8 per cent), IIFL Finance (5.82 per cent), Kfin Technologies (5 per cent), Poonawalla Fincorp (4.8 per cent), and PG Electroplast (4.75 per cent).
Analyst advises caution
The outperformance in mid- and small-cap stocks, Prashanth Tapse, Sr VP research analyst at Mehta Equities, said, is being driven by better-than-expected Q4 earnings, renewed optimism from easing global trade tensions (notably the India-UK FTA), and steady foreign investments, all of which have boosted investor confidence.
“Further supporting the rally are declining crude oil prices and expectations of lower interest rates, which are poised to benefit the Indian economy by easing inflationary pressures and improving corporate earnings in upcoming quarters,” said Tapse.
Ravi Singh, SVP of retail research at Religare Broking, sees this as a pullback rally after the recent correction in the mid- and small-cap stocks. Notably, the Nifty Midcap100 and Smallcap100 indices had settled lower by over 2 per cent each on Tuesday, May 6.
“In this volatile environment, investors can use derivatives to hedge against downside risk or capitalize on increased market volatility. Amid escalating geopolitical tensions, nations are increasingly prioritizing defense preparedness, resulting in a significant global surge in military spending. This trend, especially in the context of ongoing tensions with Pakistan, is expected to have long-term momentum,” said Singh.
Given the current global uncertainties, Singh advises maintaining higher levels of cash or liquid assets, as it enables swift responses to rapidly evolving conditions. A cautious approach—both in terms of current holdings and new investments—is recommended.
Going forward, Tapse recommends adopting a sell-on-rise strategy amid continued market volatility and headline risk, while he urges long-term investors to view market dips as opportunities to accumulate high-quality, fundamentally strong businesses for medium to long-term wealth creation.
That said, despite today’s gains, the Nifty Midcap100 and Nifty Smallcap100 indices, for the year-to-date, have logged losses of 5.25 per cent and 12.8 per cent respectively. In contrast, the benchmark Nifty50 has advanced 2.5 per cent this year.
Sensex, Nifty today
The benchmark Indian equity indices were trading on a flat note. The BSE Sensex was quoted trading at around 80,559.70 levels, down by 84 points or 0.10 per cent. The index has traded in the range of 80,844.63 – 79,937.48 today.
Tata Motors (3.88 per cent), Titan (1.56 per cent), and Power Grid Corporation (1.40 per cent) were among the top gainers of Sensex constituent stocks, while Sun Pharma (down 1.20 per cent), Asian Paints (1.27 per cent), and ITC (1 per cent) were among the top laggards of Sensex constituent stocks.
Meanwhile, NSE Nifty50 traded lower by merely 15 points or 0.06 per cent at 24,363 levels.
Sectoral markets update
The sectoral indices too were buzzing in trade with gains led by Auto, Metal, and Consumer Durables stocks. Barring Nifty FMCG (down 0.56 per cent), Pharma (down 0.35 per cent), and Healthcare index (0.26 per cent), all the other sectoral indices were trading higher.
Among them, Nifty Auto, Metal, and Consumer Durables were trading higher by over 1 per cent each. Meanwhile, Banking, Oil & Gas, Financial Services, and Realty indices were trading in the range of 0.13–0.60 per cent.
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