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Stock market returns are typically lumpy as prices do not move in a straight line but at least seven smallcap stocks have given double-digit returns in each of the last 5 months.

Over the past five months, the benchmark index Sensex has witnessed an impressive surge of more than 12%, setting the stage for robust growth in the equity market. A closer look reveals that 90 stocks listed on the BSE with a market cap over Rs 500 crore have experienced gains exceeding 100%, showcasing the dynamism of the Indian stock market.

Among the high-performing stocks, seven smallcaps have stood out by consistently recording monthly gains of 10% each over the same period, shows data pulled from ACE Equity.

What makes this surge even more intriguing is that many of these stocks have demonstrated remarkable performance despite exhibiting low trading volumes.

Topping the list is Diamond Power Infrastructure, the shares of which have rallied 777% in the last 5 months. The smallcap more than doubled in October and has given at least 40% return in all the next 4 months.

Similarly, Tine Agro is up 677%, Dolphin Offshore Enterprises (India) 661%, Cupid 480%, Newtime Infrastructure 307%, Algoquant Fintech 140% while IL&FS Engineering has also doubled in just 5 months.These staggering returns indicate a bullish market sentiment and underscore the resilience of certain stocks in the face of economic uncertainties. Market experts believe that factors such as robust corporate performances, positive economic indicators, and increased investor confidence have contributed to this impressive rally.However, analysts caution investors to remain vigilant, considering the potential risks associated with high-performing stocks and the volatility that can accompany such rapid market movements.

The unfiltered rally in smallcap space, which had recently caught Sebi’s attention, is now showing signs of slowing down.

Nifty Smallcap250 Index has formed Doji candle in monthly timeframe and an MACD break in the weekly time frame indicating more weakness, with 74% stocks in Smallcap250 index seeing negative weekly closing last week.

“The number of stocks that remained above 100DMA fell to 59% from 79% and those that remained above 50DMA fell from 82% last week to 40% this week. In the case of Nifty100 stocks, 19% of the stocks have closed above weekly high and those that closed below weekly low fell to 1% from 7% last week which are pointing towards a shift towards Largecaps and Large midcaps. In other words, those who are used to aggressive bets on the smaller caps, should recalibrate their stance and acknowledge that tailwind from institutional buying may be missing,” Anand James, Chief Market Strategist, Geojit Financial Services, said.

This trend is likely to continue since valuation in the broader market remains highly elevated and the regulator has sent a clear message regarding the froth in the segment by asking mutual funds to give more disclosures to protect investor interest in small and midcap schemes.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)

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