Midcap Counters In Limelight

Indian equities witnessed a good amount of consolidation in the benchmark Indices yesterday. However one noticeable factor was, the other broader indices outperformed benchmark indices, rising nearly 2% yesterday. As investors turned their focus on fundamentally sound mid-cap and small-cap stocks as valuations in large-cap stocks seem stretched after benchmark indices ended at record closing highs yesterday. Sensex ended down 53 points or 0.2% at24806 and the Nifty ended down 14 points or0.2% at 7402. The BSE Mid-cap index ended up 1.8% and Small-cap index ended up 1.9%.

We have been consistently bullish on the Mid cap and Small Cap space. Now even the FIIs seem to have turned bullish on the midcap companies. Since last few trading sessions many FIIs have increased their investment in the mid cap companies. Rather a few of the broking firms have been conducting meeting of the Mid Cap companies with domestic investors as well as the FIIs. While in the preceding week Centrum Broking arranged a mid cap conclave, UBS is planning to arrange a one in the next week.

So there is a clear cut fancy about financially sound mid Cap companies. Apart from that a few of the mid cap and small cap companies that were lying low on account of poor financial performance are also witnessing some traction. This is in an anticipation that the performance would improve in the coming quarters. One noticeable factor is, it the companies from the construction and Contracting segment (Especially – Road Contractors) which have seen good amount of buying. We expect the scenario to remain the same in the next week as well.

As for the other factors, the INR has rebounded from its early lows and is trading higher at 59.33 versus its previous close of 59.38. Traders adopted a wait-and-watch stance on trends of foreign fund inflows in the domestic stock market. Among the rate sensitive sectors, Realty Index was the top gainer up 1.6% followed by Capital Goods and Metal indices. IT, Oil and Gas indices were the top losers down 1.3% each.

On the global front, US indices rose, with benchmark indexes at record levels, amid better-than-forecast data on service industries before a European Central Bank decision on stimulus and a monthly employment report. The Standard & Poor’s 500 Index gained 0.2 percent to 1927.88, reaching an all-time high. The Dow Jones Industrial Average gained 15.19 points, or less than 0.1 percent, to 16737.53 after climbing to a record on June 2. The Nasdaq Composite Index added 0.4 percent.

As for the Asian markets index traded near a seven-month high after better-than-forecast data on U.S. service industries and as investors await a European Central Bank policy decision. It is been anticipated that, The ECB may become the first major central bank to take interest rates negative today as President Mario Draghi seeks to ward off deflation in the euro area. As for the indices, Nikkei is trading up marginally by 0.04% followed by Shanghai Composite up 0.02%. Hang Seng is down with miniscule losses of 0.06%.

SGX Nifty is trading flat with hardly any gains. We are expecting a similar sort of flattish opening for the Indian equity indices. However the Mid-cap and Small-cap indices are likely to outperform today also.