Nifty ended the last November expiry on monthly highs with strong rollovers in both Nifty and Bank Nifty to the current series. The December series has started with heavy long positions from the FIIs side in index futures of more than 75% on long contracts indicating strong sentiments likely to prevail in the near term. Options positions have too started to build in the current series which may keep the market in a range with a positive bias.
In the last few days, the real party for the retail traders is in the mid and small-cap stocks which are now again in the flavor thanks to the buying from both FIIs and DIIs in the equities. Retail participants who hold major of their holdings in the small ticker size stocks are also active now as per the recent price action in the said segment.
The index has been in consolidation mode for the last few days and has gained around 200 points but many midcaps and small-cap stocks have given 40-50% return in the last couple of weeks. For example, IRFC and RVNL both railway PSUs have gained around 60-70% in the last few days indicating that the pre-budget buying followed by institutional flows have again started to come into the broader markets.
From the retail investor’s point of view, it should be noted that the mid and small-cap stocks rallied in the second leg after the large-cap stock’s gains. So, as an investor, we should now more focus on quality broader market stocks that have corrected in the recent past and are now available at good supports and decent valuations.
We expect the December series to remain in consolidation mode, especially for the indices but the major action will be seen in the mid and small-cap stocks in the near-term period. Short-term traders may focus more on stock-specific action which may outperform in the current month rather than on the benchmark indices.
The only concern for the markets will be any negative news flows from the global front on Fed and Russia-Ukraine news and also domestic news flows from the election and inflation triggers. So, from the investment point of view, one should track these news flows and be ready to invest in steep declines if it happens due to the above factors.