Despite a bounceback, smallcaps still vulnerable, says Share.Market analyst. Here’s strategy on Trent, Muthoot and 4 more stocks

Q: Trump’s tariff pause came as a breather for Indian markets which ended with strong gains on Friday, though with WoW decline of 0.33%. Do you think, the uncertainty over tariffs is over at least for this quarter and with time now at its hand, India could bargain for favourable deals which will be positive for the markets?
Trump’s 90-day tariff pause has certainly brightened the mood in Indian markets, even though volatility is still a concern. This temporary measure gives India a crucial window to negotiate better bilateral trade terms, as the country sets its sights on a $500 billion trade target by 2030.

On April 9, the unexpected announcement lifted global markets: the Sensex jumped 1,310 points to 75,157 and the Nifty climbed 429 points to close at 22,828 on Friday. Although these gains helped recover some losses, the Nifty still ended the week with a small decline of 0.33%.

This pause is more of a short-term opportunity than a lasting fix. One government official told Reuters, “India was among the first to start trade deal discussions with the U.S., with a mutually agreed deadline.” The ongoing negotiations include provisions for India to potentially import U.S. goods duty-free in sectors covered under its PLI schemes.

Despite the encouraging bounce, investors are advised to remain cautious. The tariff pause is temporary, and uncertainty may return as the July deadline approaches. Volatility is likely to persist until we see clearer progress on the US-India trade deal.

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Q: What levels will be important to watch out for in Nifty and Bank Nifty in the holiday-shortened week?
For traders facing a shortened trading week, paying close attention to key technical levels will be essential. On the Nifty side, the index ran into resistance around the 21-day EMA on Friday, with strong open interest building near 23,000. This area creates a critical resistance zone between 23,000 and 23,500. Meanwhile, key support levels are holding at 22,600 and 22,000. Overall, market sentiment remains bearish until Nifty can break above 23,000 in a decisive manner.Turning to Bank Nifty, the banking index showed a bullish turnaround during Friday’s session. It found resistance in the 51,500 to 52,000 range, while support has been consistent between 51,000 and 50,000.Q: Focus is now back on earnings and TCS which announced its earnings this week has missed its earnings estimates. Nifty IT has fallen 27% in the past three months so does this call for long term tactical buy in the sector and which stocks will be in your radar?
The NIFTY IT index has dropped 31% from its mid-December 2024 peak—a decline that spans nearly four months. This downturn, combined with TCS’s lackluster Q4 results—where revenue came in at ₹64,479 crore and constant currency growth for FY25 stalled at 4.2%—calls for a cautious approach.

While Trump’s tariffs have not directly impacted the export-led Indian IT sector, indirect effects from a potential slowdown in US decision-making and GDP growth remain a concern.

In the current environment, it is crucial to focus on companies with diversified client bases, robust AI and cloud capabilities, and healthy cash reserves to navigate uncertainties.

The broader $250 billion Indian IT sector is now in a wait-and-watch mode, carefully assessing how these developments will unfold in the coming quarters.

Q: The earnings outlook for banks and auto is not that great but banks have shown resilience more than any other sector. Following back-to-back repo rate cuts, NIMs are expected to remain under pressure while slippages may also go up. What is the way out for investors who already have a position in banks and where are opportunities for new investors?
The banking sector has demonstrated remarkable resilience amid global uncertainty, positioning itself as a relative safe haven. With RBI’s second consecutive rate cut bringing the repo rate down to 6%, investors need a nuanced approach.

For existing investors in bank stocks, a selective strategy is crucial. Although NIMs (Net Interest Margins) may face pressure and slippages could rise, banks with strong deposit franchises and efficient cost structures are better positioned to navigate this challenging environment. Meanwhile, for new investors, the current rate cycle presents a tactical opportunity as liquidity improvements are expected to eventually translate into improved earnings growth.

Q: Smallcaps and midcaps have made a comeback in the last one month. Widely tracked Nifty Midcap 100 and Nifty Smallcap 100 are up by up to 4%. Is this an indication of a broad-based rally going ahead or should one hold one’s horses and let things calm down further?
Even though the Nifty Smallcap 250 index surged 3.07% on Friday—closing at 14,786.30 with a solid gain of 440.60 points—the broader picture still shows a market trying to regain its balance after a rough patch.

This bounce definitely brought some relief to investors who’ve been navigating a wave of volatility. But it’s worth noting that the index is still nearly 13% below its 200-day moving average of 16,973.80. That’s a clear sign of how deep the correction has been in smallcaps.

Digging into the technicals, all 16 moving averages are still pointing downward, which means this rebound could hit resistance soon. A particularly striking stat is the ROC(125) reading of -20.76—essentially telling us that smallcaps have lost more than 20% of their value in just six months.

Yes, the current price has nudged above the 5-day and 20-day moving averages, which is a positive short-term sign. But it’s still sitting below the longer-term averages—something we typically see in the early stages of a recovery. The big question is whether this is the real deal or just a temporary breather.

For investors, it’s a mixed bag. On one hand, valuations are starting to look a lot more attractive. On the other, technical signals are flashing a cautious yellow. The next few weeks will be key in deciding if this bounce is the start of a turnaround or just a pause before more downside.

Q: There were some big winners this week like Jyothy Labs, Dixon Tech and Kaynes while Siemens, Trent and Muthoot Finance were among the worst losers. What should investors do with them?
We can answer this by checking factor scores for these stocks using our Share.Market-powered research, which evaluates them across five key factors: Momentum, Value, Sentiment, Volatility, and Quality.

Each stock is scored out of 5 on these factors, helping investors assess price trends, fair valuation, market perception, risk levels, and financial strength. By using these insights, investors can make informed decisions and identify strong opportunities in the current market.

Jyothy Labs

Momentum: 1/5 – The stock has very weak momentum, marking it as a huge underperformer in recent times.
Value: 2/5 – The stock appears somewhat expensive relative to its fundamentals.
Quality: 5/5 – Excellent quality, indicating strong financial health and robust operational performance.
Volatility: 5/5 – Very low price fluctuations, suggesting high stability.
Sentiment: 2/5 – Bearish sentiment among analysts and investors, indicating a cautious outlook.

Dixon Tech

Momentum: 5/5 – The stock is a strong outperformer, indicating robust upward price action.
Value: 1/5 – It’s considered very expensive, which might be a concern for value-focused investors.
Quality: 5/5 – Top-notch financial and operational performance, reflecting excellent fundamentals.
Volatility: 4/5 – Relatively low price fluctuations, offering stability in movements.
Sentiment: 4/5 – Analysts are bullish, and investor outlook remains positive.

Kaynes

Momentum: 4/5 – The stock has shown strong recent performance, indicating an upward trend.
Quality: 4/5 – The company demonstrates good financial health and operational efficiency.
Volatility: 2/5 – High price fluctuations suggest greater short-term risk.
Sentiment: 3/5 – Analysts remain neutral, showing a balanced market outlook.

Siemens

Momentum: 2/5 – Weak momentum, indicating that the stock has been underperforming recently.
Value: 1/5 – Very expensive, suggesting it may be significantly overvalued relative to fundamentals.
Quality: 5/5 – Excellent quality, showing strong financial health and efficient operations.
Volatility: 5/5 – Very low price fluctuations, suggesting high stability.
Sentiment: 2/5 – Bearish sentiment, implying cautious or negative outlook among investors.

Trent

Momentum: 2/5 – Weak momentum, indicating that the stock has been trailing broader market trends.
Value: 1/5 – Very expensive, suggesting that the stock may be priced well above its intrinsic worth.
Quality: 5/5 – Excellent quality, highlighting strong fundamentals, healthy balance sheet, and efficient operations.
Volatility: 5/5 – Low volatile, with significant price fluctuations that imply higher risk.
Sentiment: 1/5 – Very bearish sentiment, reflecting pessimism or lack of confidence from market participants.

Muthoot Finance

Momentum: 5/5 – The stock is showing strong momentum, indicating a solid uptrend and investor confidence.
Value: 5/5 – Very attractive valuation, suggesting the stock is currently undervalued relative to its fundamentals.
Quality: 3/5 – Moderate quality, pointing to decent financials but possibly some operational or margin-related concerns.
Volatility: 5/5 – Very low price fluctuations, suggesting high stability.
Sentiment: 5/5 – Extremely bullish sentiment, showing strong investor optimism and positive outlook.

(Disclaimer: Investments in securities are subject to market risks. Read all the related documents carefully before investing. All investors are advised to conduct their own independent research into investment strategies before making an investment decision. Past performance does not guarantee future returns.)