Midcap, smallcap stocks fall 1% after hitting new highs even as Nifty soars; what halted broader market rally

Midcap and smallcap stocks fell over 1 per cent on Wednesday, even as benchmark indices BSE Sensex and Nifty 50 hit a new record high. Headline indices logged fresh closing highs for the second consecutive session on Wednesday, following expansion in PMI Services in July, sequentially. While midcap stocks went through a corrective phase on Wednesday after many months of outperformance. “The thumping retail response on the first day itself in the IPO of the foursome seems to have had a cool-off effect on the broader markets today,” S Ranganathan, Head of Research, LKP Securities, said.

The broader market indices, BSE Midcap and BSE Smallcap, slid from all-time highs to end in the red. BSE Midcap index fell 1.05 per cent or 244.5 points to settle at 23,130, while BSE Smallcap index lost 1.06 per cent or 286.4 points to finish at 26,848. “With other markets doing well, Nifty could continue to remain steady or up, while the broader market correction could continue for a few sessions,” said Deepak Jasani, Head of Retail Research, HDFC Securities. In comparison, BSE Sensex ended at 54,369.77, up 546.41 points or 1.02 per cent. It had hit a fresh all-time high of 54,465.91 intra-day. Similarly, Nifty 50 index rose 128.05 points or 0.79 per cent to 16,258.80. NSE’s Nifty 50 index had touched a new peak of 16,290.20 in intraday session.

While, Nifty Midcap 50, Midcap 100, Nifty Smallcap 100, Nifty Smallcap50, Nifty Smallcap 250 and Nifty Mid Small Cap 40 indices settled over 1 per cent down on Wednesday. Sectorally, Nifty Realty index snapped a 4-day winning run and finished nearly 2 per cent. Nifty Auto and Nifty FMCG indices fell nearly per cent and Nifty IT index lost 0.61 per cent. On the flip side, Bank Nifty surged 2.33 per cent to end at 36,028.05 levels. “The Bank Nifty index showed a catch up move to the recent underperformance and surpassed the 36000 mark,” said Ruchit Jain, Senior Analyst – Technical and Derivatives, Angel Broking. He also added that in spite of the key indices holding strong, the broader markets witnessed profit booking and hence, the Nifty Midcap index ended with a loss of over a percent. This could be seen as a divergence which indicates that the market moves may not be as smooth as one would like it to be post such breakout.

Analysts suggest that key events such as weekly F&O expiry and the Reserve Bank of India (RBI) Monetary Policy outcome could lead to some volatility. While some analysts continue to remain positive on the broader markets and suggest buying on dips. “Midcap space is expected to move incrementally with pockets of outperformance,” said Sahaj Agrawal, Head of Research – Derivatives at Kotak Securities.

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