Equity benchmarks, the Sensex and the Nifty, showcased a notable turnaround on March 14, erasing early losses and ascending higher fueled by extensive buying activity spanning across sectors. Analysts, while optimistic about the market’s resilience, project a consolidation phase for the Nifty within the range of 22,400 to 21,800 in the near term, citing the dominance of largecaps over mid- and smallcaps as a supporting factor.
With the Sensex surging by up to 0.6 percent, reaching the pinnacle at 73,097, and the Nifty following suit, touching 22,146, market sentiment remained buoyant. Notably, market breadth remained positive as 2,615 shares advanced, 1,095 shares declined, and 92 shares remained unchanged.
In light of prevailing market volatility, Ajit Mishra, Senior Vice-President of Technical Research at Religare Broking, advised investors to exercise prudence and refrain from adopting aggressive positions. Mishra recommended a strategic reallocation of portfolios towards largecaps or large midcaps to navigate the current market landscape effectively. Emphasizing the significance of the Nifty sustaining levels above 22,200 in the forthcoming days, Mishra noted that such a development would signal a positive trend reversal, instilling further confidence among investors.
According to analysts at ICICI Securities, the Nifty is expected to undergo a consolidation phase within a broader range of 22,400 to 21,800, with a focus on stock-specific movements driving market dynamics. They emphasized the critical significance of closely monitoring the Nifty’s performance, particularly highlighting the pivotal threshold of 21,800. Should the Nifty close below this level, analysts cautioned that it could potentially trigger an extended correction in the market, making it a crucial level for investors to keep a close eye on in the upcoming sessions.
Following a day marked by significant losses, the broader markets rebounded to register gains on March 14. The Nifty Midcap 100 and Nifty Smallcap 100 indices surged by up to 3 percent, accompanied by a 5 percent drop in the fear gauge India VIX, which traded around the 13 level.
Analysts’ opinions diverge regarding the nature of this trend. Some view it as a temporary bounceback, attributing it to broader indices entering oversold territory. Conversely, others interpret it as the beginning of a further correction.
ICICI Securities analysts anticipate a potential rebound in the smallcap index following a modest correction. Citing historical trends in secular bull markets, they note that smallcap indices often undergo secondary corrections, typically around 17 percent. With the current correction nearing 15 percent, they posit that the smallcap index may be poised for a temporary pullback.
Conversely, Kotak Institutional Equities analysts express reservations about the valuations of numerous mid and smallcap stocks, deeming them expensive. While they are uncertain if the ongoing correction signals a reversal of market fundamentals, they assert that many low-quality stocks could still face considerable declines.
The stress in mid and smallcap stocks has been exacerbated by market regulator Sebi’s directive to mutual fund houses to moderate their investments in these segments due to concerns over inflated valuations. The results of stress tests conducted by these mutual fund houses are expected to be disclosed on March 15.
Despite market turbulence, all sectors, with the exception of Bank Nifty, witnessed gains. Nifty Metal and Oil & Gas indices emerged as top performers, registering gains of over 2 percent each.
On the macroeconomic front, India’s economic indicators remained relatively stable. While retail inflation eased to 5.09 percent in February from 5.1 percent in January, wholesale-based inflation (WPI) saw a slight dip to 0.20 percent in February from 0.27 percent in the previous month.
Sources: moneycontrol.com
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