6 hours Ago
Brokerage firm Nuvama anticipates a further fall between 5% to 10% in the Nifty Midcap 100 and Nifty Smallcap 100 indices if they close below their respective crucial support levels. NSE In a note authored by Nuvama's Manav Chopra on October 17, the brokerage said that the recent broader market moves are characterised by below-average volumes and weak breadth readings, both signaling divergence and indicating a fragile rise. The Nifty Midcap 100 index made a high on September 24, 2024 and has corrected 5% from those levels.
78 out of the 100 index constituents have delivered negative returns during this period. Chopra further wrote that the Nifty Midcap 100 index has formed a lower high on the daily chart, a key technical level that could present a significant resistance point in the near-term. "On the monthly charts, the sector has displayed multiple hanging man candlestick patterns, which are considered bearish reversal signals after a prolonged uptrend," he added.
In case the Nifty Midcap 100 index closes below 58,000 on a closing basis, that will signal a bearish confirmation and heighten the downside risk. Similarly, in case the Nifty Smallcap index closes below levels of 18,900 on a closing basis, that will signal a bearish confirmation for the index. "We anticipate a period of consolidation with potential declines as internal sector rotation occurs.
The internal churn might signal a shift from high-beta stocks towards more stable, defensive sectors, which could further weigh on midcap and smallcap performance in the near-term," the note from Nuvama said. Chopra mentioned that the current market patterns indicate that midcaps and smallcaps may encounter greater challenges in the coming period in comparison to largecap names. This is largely driven by technical signals such as lower highs and bearish candlestick formations, indicating potential downside risks.
Nuvama therefore advises maintaining positions in low-beta sectors like IT, insurance, private banks, consumer durables and pharma, which are more resilient during periods of heightened uncertainty..
