Small caps, mid-caps yet to surpass record levels

The benchmark Sensex on Monday hit a fresh all-time high and closed at a record level but the broader markets are still away from their previous highs, which, analysts say, reflects pessimism in the markets and their cautious approach.

Despite slowing economic activity in the country, the Sensex managed to surpass its previous highs on Monday. It touched a life-time high of 40931.71 but the BSE Small cap index closed over 1,700 points away from its previous high it had logged in April this year.

While the broader Nifty50 index seems to be performing better and expected to touch record levels soon, the BSE Mid-cap index is also over 700 points away from its previous high it logged earlier in April.

Experts said that this trend is owing to the foreign funds buying select large cap scrips.

"The trend is that the markets are still pessimistic and moving ahead with lot of caution. The strategy should be to buy or accumulate strong mid cap companies which are free from corporate governance," said Shrikant Chouhan, Head of Technical Research at Kotak Securities.

Chouhan, however, said that the Nifty has made bottom at 10,637 in the month of August 2019. "

"The last 2 years, whenever we saw such type of bottoming pattern in the market, Nifty 50 has always outperformed to Nifty 500 and Nifty Midcap indices," he added.

A "bottom" in market parlance refers to the lowest price traded by the financial security.

Besides, with the GDP figures scheduled for release on Friday, analysts said that the markets are not expecting anything positive to come out of second quarter GDP numbers.

"Optically the markets do not look cheap. However, technical factors (liquidity, lack of alternative asset class, among others) means that equities could continue to do well for some more time," said Deepak Jasani of HDFC Securities.

(Ravi Dutta Mishra can be reached at ravidutta.m@.in)

( With inputs from IANS )