Small-Cap stars shine bright amidst a 'Muted Market Week'
The Indian stock market witnessed a relatively quiet, holiday-shortened week ending December 27, 2024, with the benchmark indices, Sensex and Nifty, registering modest gains. However, beneath the surface of this seemingly lackluster performance, a select group of small-cap stocks delivered spectacular returns, surging between 10-25% and capturing the attention of savvy investors. This divergence highlights the importance of looking beyond the headline indices to uncover hidden gems, even when the broader market sentiment is subdued.
Benchmark indices: A week of consolidation
The BSE Sensex added 657.48 points (0.84 percent) to close at 78,699.07, while the Nifty50 index rose 225.9 points (0.95 percent) to end at 23,813.40. The market action was largely range-bound, characterized by what Amol Athawale, VP-Technical Research at Kotak Securities, described as "non-directional activity." The Nifty found support around the 23,650 level, while profit-taking emerged near the 200-day Simple Moving Average (SMA) of 23,860.
Sectoral Performance: Auto and Pharma Lead, Media and Metals Lag
Among the sectors, Nifty Auto and Pharma were the star performers, each gaining over 2 percent during the week. The Nifty FMCG index also saw a respectable increase of 1.5 percent, while Nifty Bank and Realty added 1 percent each. On the flip side, the Nifty Media index shed nearly 2 percent, and the Nifty Metal index declined by 1 percent.
FIIs vs. DIIs: A tug-of-war continues
Foreign Institutional Investors (FIIs) continued their selling spree, offloading equities worth Rs 6,322.88 crore during the week. However, Domestic Institutional Investors (DIIs) provided strong support, purchasing equities worth Rs 10,927.73 crore. For the month till December 27, FIIs sold equities worth Rs 10,444.10 crore, while DIIs bought equities worth Rs 27,474.14 crore.
Small-Caps: The week's standout performers
Despite the broader market's muted performance, the BSE Small-cap index saw significant action, though it ended the week flat overall. Certain small-cap stocks witnessed remarkable rallies:
- Top Gainers (10-25%): Intellect Design Arena, Amber Enterprises India, Greaves Cotton, Aarti Pharmalabs, PTC Industries, Saurashtra Cement, Caplin Point Laboratories, Devyani International, PTC India Financial Services, Hitachi Energy India, Campus Activewear, Triveni Engineering and Industries.
- Top Losers (10-13%): Rajoo Engineers, Titagarh Rail Systems, Indo Count Industries, KPR Mill, Kitex Garments, Healthcare Global Enterprises, Hindustan Construction Company, Paisalo Digital, NGL Fine Chem.
Market Experts' views: Cautious optimism with a focus on stock selection
"The market outlook for the remainder of the year is expected to remain muted," said Aishvarya Dadheech, Founder and CIO of Fident Asset Management, citing robust returns over the past three years. He emphasized that future market performance will hinge heavily on earnings growth, projected at 4-5 percent for FY25 and 14-15 percent for FY26.
Nagaraj Shetti, Senior Technical Research Analyst at HDFC Securities, noted the Nifty's slightly positive short-term trend with range-bound action. He anticipates strong overhead resistance around 24,000-24,200 levels and suggests a "sell-on-rise" approach near these hurdles.
Hrishikesh Yedve, AVP Technical and Derivatives Research at Asit C. Mehta Investment Interrmediates, highlighted the Nifty's formation of a doji candle on the daily chart and an inside bar candlestick pattern on the weekly chart, indicating strong demand near the 23,500-23,540 zone. He sees 23,860 (200-DSMA) as an immediate hurdle, with a potential move towards 24,000-24,100 on a sustained break above this level.
Unearthing opportunities in a selective market
The week ending December 27th showcased a mixed bag for the Indian stock market, with the headline indices delivering modest gains while select small-cap stocks stole the limelight. This divergence underscores the importance of a discerning investment approach in the current market environment. While the broader market may be consolidating, opportunities continue to exist in specific pockets, particularly among smaller companies with strong growth potential. The contrasting investment flows from FIIs and DIIs highlight the differing perspectives on the market's near-term direction. As we head into the new year, investors will be closely watching corporate earnings, macroeconomic indicators, and the upcoming Union Budget for further cues. The market's performance in the coming weeks will likely be determined by a combination of these factors, along with the ongoing tug-of-war between institutional investors. The current scenario emphasizes the need for thorough research and a selective approach to stock picking, focusing on companies with solid fundamentals and a clear path for future growth, especially within the small-cap space.
