A move that can be a relief for the Small and Midcaps, Nuvama Research has said these stocks which were last year’s outperforming segments, have overcome the corrective phase.
The corrective phase has bottomed out and it’s time to initiate longs, it said.
Market has reached an oversold condition at key support levels and the current situation represents a corrective phase within the ongoing bull market. This indicates a potential opportunity to initiate long positions.
Large caps have also seen a healthy under-the-carpet corrective phase without too much damage to the Nifty50 as it held above the 21700-21800 zone.
“There continue to be strong tailwinds from global markets and with earnings season resuming in the coming weeks followed by general elections, the markets are light on positions and offer a good risk premium for long positions,” Manav Chopra, Director, Technical Analyst at Nuvama Institutional Equities, said.
Nuvama’s top midcap picks include JSW Energy, Dixon, SAIL, Ipca Laboratories, Policybazaar, and OIL. Meanwhile, its top small-cap recommendations are Apar Industries, BSE, Karur Vysya Bank, Triveni Turbine, Zensar Technologies, and Datamatics.
“The current scenario is a corrective phase in the ongoing bull market and has reached an oversold condition at key support levels and we recommend taking long positions,” Manav Chopra said.
“The broader market, which was overheated, has seen a healthy decline and it appears that the price correction phase is over and will likely lead to a bottoming and a resumption of the bull phase,” he added.
Midcap100 index is in a correction phase and is almost 10 per cent below its recent high. In the past, such corrections have provided a good opportunity for long positions.
Nuvama Research said the index has tested the rising trend line and formed a series of lower shadows along with an inside candlestick pattern. The Relative Strength Index (RSI) has found support in the bull market range and indicates a high probability zone for a reversal.