Mid-cap Stocks Reach New Heights as Broader Markets Outperform Benchmarks

Indian Equity Market Extends Upward Momentum Despite Volatility

The Indian equity market continued its upward momentum for the second consecutive week, with broader indices outperforming the benchmark indices. However, gains remained capped due to MSCI rebalancing-related volatility, concerns over the monsoon outlook, and lingering geopolitical tensions between the US and Iran. Investors remained cautious amid uncertainty surrounding global market conditions and foreign fund flows.

The Nifty Mid and Smallcap indices extended their winning streak for the second consecutive week, gaining between 0.5-1 percent, with the Midcap index rising to a fresh record high of 62,907.50 during the week. The BSE Sensex declined 639.61 points, or 0.84 percent, to close at 74,775.74, while the Nifty 50 fell 171.55 points, or 0.72 percent, to settle at 23,547.75.

The rally in the midcap index was led by strong gains in Adani Total Gas, Exide Industries, ICICI Prudential Asset Management Company, Hitachi Energy India, JSW Energy, and Premier Energies. On the other hand, laggards included Multi Commodity Exchange of India, Rail Vikas Nigam, Container Corporation of India, Bharat Dynamics, FSN E-Commerce Ventures, and PB Fintech.

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Domestic Institutional Investors (DIIs) maintained their buying momentum, purchasing equities worth Rs 25,803.45 crore. Meanwhile, Foreign Institutional Investors (FIIs) remained net sellers, offloading equities worth Rs 23,734.68 crore. The total market capitalisation of BSE-listed companies rose more than Rs 2 lakh crore during the week.

Santosh Meena, Head of Research at Swastika Investmart, stated that the Indian equity market witnessed a volatile and range-bound week, with both the Nifty and Sensex ending nearly 1% lower. Friday's sharp sell-off, driven largely by MSCI rebalancing-related adjustments and concerns surrounding the monsoon outlook, was a major contributor to the week's weakness.

Sectoral indices ended on a mixed note during the week. The BSE Telecommunication, BSE Power, BSE Capital Goods, and BSE PSU Bank indices were among the top gainers, rising 2–3 percent each. Meanwhile, the BSE Auto and BSE Realty indices advanced around 1 percent each. On the other hand, the BSE FMCG, BSE Oil & Gas, BSE Energy, and BSE Healthcare indices declined 1–1.5 percent each.

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Looking ahead, Benchmark indices are expected to remain range-bound next week, although select midcap and smallcap stocks could continue to outperform on the back of healthy earnings momentum and strong domestic liquidity. Some relief has emerged in global market sentiment after reports suggested a 60-day US-Iran ceasefire, raising hopes of easing geopolitical tensions and gradual normalisation of shipping flows through the Strait of Hormuz.

However, investors are expected to remain cautious as mixed signals from the ongoing negotiations and recurring geopolitical flare-ups continue to keep volatility elevated across global financial markets.

Amol Athawale, VP Technical Research, Kotak Securities, believes that as long as Nifty trades below the 50-day SMA of 23,700 and for Sensex 75,300, the weak sentiment is likely to continue. On the downside, the market could slip to 23,300-23,200/74,100-73,800. Further downward movement may also continue, potentially dragging the index to 23,050-23,000/73,300-73,100.

On the upside, above the 50-day SMA of 23,700 and for Sensex 75,300, a bounce back could extend till 23,800/75,900. If it crosses 23,800/75,900, the index could move towards 24,000-24,100/76,500-76,800.

For Bank Nifty, the 50-day SMA of 54,500 will act as a trend-deciding level. Below this, it could decline to 53,500-53,000. On the flip side, if it manages to trade above 54,500, it could rise toward 55,500-55,700. Given the current market volatility, level-based trading would be the ideal strategy for traders.