Markets on a Steady Ascent

The current scenario has proved to be a golden opportunity for investors investing in low-risk, high-growth and quality mid-cap and small-cap stocks

The domestic stock markets have continued to remain unflustered by the pandemic. In the month of May 2021, the Sensex gained around 6.61 per cent, recording the sharpest May month rally in around seven years. The rally was led by a sharp surge in stocks such as those of consumer discretionary, financials, banking and Reliance Industries (RIL). It is believed that the impact of the pandemic in 2021 on the economy is much lesser compared to what had been witnessed in 2020. Investors remain optimistic about economic rebound and progress in the fight to bring the pandemic under control is expected to bring about more buying interest across major sectors. In spite of minor room for corrections, there is still more upside potential for the stock markets. 

Positive global cues have also boosted investors’ confidence. During the fortnight, the Sensex gained 4.75 per cent while the Nifty surged by 4.42 per cent. Mid-cap and small-cap stocks continued to be investors’ favourite choices as the right portfolio having a perfect mix of large-cap, mid-cap and small-cap stocks has rewarded many investors with outstanding gains. While mid-caps and small-caps are cyclical in nature with short boom and bust cycles compared to the steadier large-caps, the current scenario has proved to be a golden opportunity for investors investing in low-risk, high-growth and quality mid-cap and small-cap stocks.

During the fortnight, the Mid-Cap index rose by 4.40 per cent while the Small-Cap index jumped by 4.60 per cent. Amongst sectoral indices, Realty was the biggest gainer, increasing by 10.35 per cent during the fortnight. Moderation in corona virus cases in India has expanded the risk appetite of investors, thus leading to an overall bullishness in the realty sector. Recently it has been seen that FIIs have been showing maximum interest in IT and real estate sector companies, thus further boosting investor confidence. IT jumped up by around 4.72 per cent during the fortnight. For the same period of time, FMCG and Healthcare indices gained by 0.89 per cent and 1.85 per cent, respectively. With optimistic management commentary post financial results’ announcements in the banking sector, a renewed interest in banking stocks among investors can be seen.

Bankex jumped by around 6.01 per cent during the fortnight. Power companies have been reporting multiple new projects in the power transmission space and infrastructure has been inching towards the forefront. The undervalued quality stocks in the power sector have caught investors’ attention as they wait for a much stronger rally aided by strong growth momentum. The Power index was up by 4.62 per cent in the last fortnight. Meanwhile, the Auto index gained by around 4.86 per cent in the last few weeks and Metal dipped by 1.37 per cent. Trading data shows that FIIs were net buyers to the tune of Rs 1,054.44 crore while DIIs were net sellers to the tune of Rs 43.86 crore during the fortnight.