Technical analysts on what could be in store for small-cap shares?
Analysts said technical indicators are pointing to further weakness. The Nifty Midcap 150 index dropped 2.7%, the Smallcap 250 index fell 3.8% and Microcap 250 plunged 5.1% on Monday. If the Nifty Smallcap 100 index is unable to hold above a key support of 12,200, it could decline to the 11,400 range.
The index closed at 12,463 on Monday. ET asked three technical analysts what’s in store for smaller shares in the days ahead.
DHARMESH SHAH HEAD-TECHNICALS, ICICI SECURITIES
What is the technical set-up in small-cap shares? Nifty Smallcap index retreated from a 15-year resistance trend line drawn adjoining 2007-21 high, indicating profi t booking after a 50% rally seen during March-October 2023 amid overbought conditions. In a secular bull market, secondary correction is a common phenomenon wherein the smallcap index tends to correct 12-15% from swing highs.
What is the road ahead? We believe the current correction would make the broader market healthy, wherein strong support is at 11,400. Thus, the focus should be on accumulating quality stocks backed by strong earnings in a staggered manner.
CHANDAN TAPARIA ANALYST DERIVATIVES, MOTILAL OSWAL FINANCIAL SERVICES
What is the technical set-up in small-cap shares? Though the Nifty Smallcap 100 index corrected by more than 3.5% on Monday, it respected its 50-day exponential moving average (EMA) on the daily chart for the last 135 trading sessions, which was retested on the last trading session.
What is the road ahead? Three technical indicators are pointing to weakness in small-caps.
