Percentage of small, midcap stocks trading below 20-DMA down to 57% from 83%: Anand James

The percentage of small and mid-cap stocks trading below 20-DMA has come down to 57% from 83% last week, indicating attempts to pull back, says Anand James, Chief Market Strategist, Geojit Financial Services.

However, the percentage of stocks closing below the 30-day low increased to 9% from 2% last week which is indicating that the recovery that we have seen lately among the SMIDs is yet to become broad-based, he said.


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Edited excerpts from a chat:

After the solid rally seen particularly on Thursday’s expiry, what does the bigger picture look like for the April series which will also mark the beginning of voting in the Lok Sabha election?

In the last 10 years, 60% of the time Nifty50 has gained an average of 5% in April. If we look at the returns during the election period in the last 20 years, 75% of the time April months have been positive. Top contributors to Nifty50 this month were Auto and Banks, which contributed around 43% to Nifty. We haven’t seen much participation from the IT, Energy, and Oil sector which together contributes around 27% to Nifty.

These sectors need to shed their troubles to lend momentum to Nifty’s upsides. The need for more actors to take centre stage is pressing, as Thursday saw a clear case of rejection trade in the face of a record peak. It was evident that while traders were keen on bargain hunting early in the week, which ultimately forced a short covering rally as the week progressed, with an urgency prompted by derivatives’ expiry, the turn lower from the record peak illustrates a strong unwillingness to chase prices higher. This however is not an outright signal for a collapse, but we would need to get above 22,350-22,410 to nurture hopes towards a 22,700-23,000 push. On the downside, we have ample support near 22,200 as well as 22,050, which could ensure that we may not see a collapse per se. That said, the real risk is that momentum stays away from either side, for at least a week, before earnings numbers flow in.

Steady buying was seen in both mid and smallcaps during the week. Do you see the green patch continuing in the favour of bulls as we step into the busy earnings season in April?

The percentage of small and mid-cap stocks trading below 20 DMA has come down to 57% from 83% last week, indicating attempts to pull back. However, the percentage of stocks closing below the 30-day low increased to 9% from 2% last week which indicates that the recovery that we have seen lately among the SMIDs is yet to become broad-based. Having said that the MACD crossover that we had pinned on last week as the basis of expecting outperformance over larger stocks, is maturing well, boosting confidence towards playing more upsides. A similar positive crossover is also seen in the mid-cap index, encouraging us to stick to the buy side.

After the sell-off in Nifty IT, do you see chances of a pullback rally now?

90% of the IT stocks are trading below the 50-day SMAs and 40% of the stocks have closed below 1 month low. IT stocks have had a tough time since January 2024, but are about to find some solace in April, which has been seasonally a good time for IT in general. In fact, 81% of the time in the last 12 years, Nifty IT gained an average 4% in April. Also, the Nifty IT index is nearing 50% fibo retracement of the October 2023-January 2024 move, and with 30% of the stocks having moved into the oversold region, it may not be long before IT turns higher.

BSE and Angel One were among the top gainers in the week. Which side of the trade would you be going ahead?

BSE has had a vertical rise in the last fortnight, swinging from one end of the lower Bollinger band to the upper band, while following Nifty’s pattern closely during this period. Just like Nifty did, BSE also turned lower from its record peak on Thursday. We will begin next week assuming that the stock is still within a broad consolidation band and that Thursday’s pullback may not extend as far as Rs 2,300, but will be keen to chase rallies should there be an outright push above Rs 2,600. Angel One on the other hand had a muted Thursday in stark contrast with the large gain on Wednesday. We believe that the slowdown near the upper Bollinger band is a sign of potential pullback in the next few days. Longs hence could have stop loss below Rs 2,860, with eyes on Rs 3,350-3,700 in two to six weeks’ time frame.

Give us your top picks for the week.

KPRMILL (CMP: 844)

View: Buy

Targets: 890 – 930

Stop loss: 814

After making an all-time high in November 2023, the stock has been in a profit booking mode and found a base near 720 from where a bounce back is underway. It has seen a Psar breakout in the weekly time frame along with MACD very close to breaking the signal line. All in favor of positivity in the near term. 14 weekly RSI is above 60 underlining the strength in the ongoing momentum. We expect the stock to move towards 890 and 930 in the near term. All longs may be protected with stop loss placed below 819.

INDIACEM (CMP: 214)

View: Buy

Targets: 234 – 242

Stop loss: 203

After hitting the horizontal resistance zone in December, the stock has been in a correction. Last week, it formed a base around the horizontal support of 195, and long-legged Doji was formed in the weekly charts indicating a reversal. Also, the MACD histogram has seen signs of exhaustion at lower levels in the weekly time frame supporting our view for a pullback in the near term. We expect the stock to move towards 234 -242 in the next few weeks. All longs may be protected with stop loss placed below 203.

Harry Byrne

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