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It was another record-breaking week for benchmark equity indices ending with strong gains as the Sensex and Nifty settled at record closing highs. The Sensex settled above 55,000 level while the Nifty closed above the 16,500 level. Gains were triggered by upbeat global markets and supportive domestic cues amid fears of a third wave. For the week ended August 13, Sensex soared 1,159 points or 2.14% to settle at 55,437 while Nifty surged 290 points or 1.79% to settle at 16,529.

But unlike the benchmark indices, broader market showed some pain as the BSE MidCap index fell 263 points or 1.14% to settle at 22,941. Whereas the BSE SmallCap index dropped 450 points or 1.68% to settle at 26,355. The panic in the mid & small cap space was primarily driven by a BSE in a circular notified that it was capping the rise in the share price of stocks exclusively listed on its platform through the ‘Add-on Price Band Framework’ on Monday, August 09. However, August 11, it modified the notification and clarified that the new surveillance measure will be applicable only on securities worth Rs 10 or above and having a market capitalisation of less than Rs 1,000 crore. The exchange further added that the said framework is applicable to BSE exclusive securities in groups including X, XT, Z, ZP, ZY, Y.

“BSE’s new surveillance framework with add-on price bands for specified stocks listed exclusively on the BSE is a timely initiative to curb excessive speculative activity in these stocks. It is a fact that there is froth in the mid and small-cap space. Many stocks in this segment have low liquidity and, therefore, are capable of being manipulated by a group of traders. In the present exuberant state of the market, manipulation is easy and appears to be happening. Therefore, this initiative from the BSE is appropriate from the perspective of market integrity,” said VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

Top gainers

Despite broader markets reeling under pressure this week some 157 stocks or 31% constituents of the BSE 500 index ended the week with positive returns. With a gain of 19.43%, Shriram City Union Finance was the top performer of the week as its shares rallied from Rs 1,811.95 on August 6, 2021, to Rs 2,163.95 on August 13, 2021. Vakrangee (up 14.48%), Max Healthcare Institute (up 14.40%), VIP Industries (up 13.25%), Allcargo Logistics (up 12.12%), VRL Logistics (up 10.57%) were the other stocks that rallied over 10% this week.

“The week witnessed a volatile start as global markets were not in favour of bulls. Measures taken by BSE to curb excessive price movement in smaller stocks also nudged selling pressure in small and mid-cap stocks. However, a late clarification from BSE on limiting its restrictions to penny stocks gave comfort to the broader markets,” said Vinod Nair, Head of Research at Geojit Financial Services.

Support from large caps, especially banks and IT stocks helped the market to end the week at record high levels. Investor sentiments were also boosted as retail inflation eased to 5.59% in July from 6.26% in June owing to softening food prices. Industrial Production rose by 13.6% YoY in June on account of good performance by the manufacturing, mining and power sectors, Nair added.

Outlook

Market participants will be looking forward to Q1 June 2021 results, trends in global stock markets, progress of monsoon, the movement of rupee against the dollar and crude oil prices will dictate trend on the bourses in the near term. Investment by foreign portfolio investors (FPIs) and domestic institutional investors (DIIs) will be watched. On the macro front, Wholesale price index (WPI) inflation for July 2021 is due on 16 August.

“Equity market is likely to continue with its strong positive momentum as the economic activities are expected to further pick up pace with the lockdown measures getting relaxed. The result season is now largely over with corporate earnings being in line to better than expectations. Going ahead, we expect corporate earnings to improve further as the economy opens up and improving vaccination trends,” said Siddhartha Khemka, Head – Retail Research, Motilal Oswal Financial Services.

According to Motilal Oswal Financial Services estimates Nifty EPS (earnings per share) for FY22E/FY23E at Rs 725/Rs 862 which implies growth of 35%/19% respectively. The market has been witnessing a rotation from mid to large caps – a phenomenon which Khemka believes could continue as well in the near term given the sharp outperformance of the broader market in the last 18 months. In terms of sectors, Motilal Oswal Financial Services is positive on IT, metals, cement, select BFSI, Consumer, Auto, and Healthcare space.