Check Out The Mid-Cap & Small-Cap Spaces For Now

The equity markets in India traded in a range bound manner last fortnight with mid-caps and small-caps outperforming BSE Sensex by an impressive margin. The markets behaved volatile owing to India’s surgical strike on Pakistani soil on September 29,2016. Sensex crashed by over 500 points on the day media reports talked about India’s aggressive stance against terrorists hiding in Pakistan. Markets have remained subdued since the event with Sensex shredding almost 0.8 per cent in last 15 days.

Even though markets welcomed the rate cut move by RBI on Oct 4, markets have not been able to close above the intra-day high made on September 29, at 28,475 for BSE Sensex. After recent revision, repo rate now stands reduced by 0.25 per cent at 6.25 per cent with the new RBI governor Urjit Patel making a strong statement on interest rate front in his first appearance.

Barring two major events viz., India’s surgical attack on Pakistani soil and Repo rate cut which fuelled volatility in the market, there were no external factors affecting the markets. Global financial markets traded positive with Dow Jones Industrial Average gaining almost 0.80 per cent in past 15 days. FTSE was one of the best performing indexes globally clocking gains of 3.32 per cent in past two weeks alone. Asian markets performed in line with the global markets with Hang Seng and Nikkie gaining 2.29 per cent and 1.91 per cent respectively.

Foreign Portfolio Investors (FPIs) continued to remain bullish on Indian stock markets as indicated by the net cash inflows of Rs 8,136.39 crores during the period between September 27 to October 7, 2016.Incidentally Domestic Institutional Investors (DIIs) have turned net buyers from net sellers with DIIs shopping equities to the tune of Rs 3,490.52 crore. The past nine trading sessions running uptill October 7 saw a total of almost Rs 11,626.91 crore invested in equity markets in India.

Given such healthy cash inflows for the past few sessions and with mid-cap index and small-cap index gaining by 2.13 per cent and 2.71 per cent, we can ascertain where the institutional money has been flowing especially when the BSE Sensex is down by 0.80 per cent during the same period. Metal Index was the key out performer with the index gaining as much as 4.19 per cent followed by auto index with gains of 2.22 per cent. IT index remained the worst performer with the index loosing 1.54 per cent followed by power and banking index.

We expect the earnings to improve marginally in coming quarter as the benefits of interest rate easing will be felt in this quarter. Investors can wait for opportunities that markets may have on offering owing to the heightened volatility. Check out the small-cap and mid-cap space at this time while large-cap is not going to be a hot and happening, for now. Earnings calendar also needs to be followed closely as results will start coming out every other day starting October 7.