Lack of depth in mid- & smallcap rally hints all’s not shining on D-Street

In the Nifty Midcap 150 and Smallcap 250 indices, 20 stocks have contributed to roughly 50% of the respective index’s rally this year, according to an ET study. This means 13% of the stocks in Midcap 150 and 8% of the stocks in Smallcap 250 have done the bulk of the heavy lifting so far in 2024.

The Midcap 150 index has returned 21.86% and the Smallcap 250 index has advanced 21.13% in 2024 so far, outperforming the benchmark Nifty, which has gained 8.35% in this period. All three indices hit record highs on Tuesday, extending their record-breaking rally.

Agencies

Money managers say narrowing contributions to the gains of these indices show discomfort over the extent of the run-up in these stocks.

“Directionally the momentum for these looks strong, but valuations have become very high, and any sentiment change may lead to a fall,” said Phanisekhar Ponangi, chief investment officer at MavenArk Asset Managers.

The shares that have contributed the most to the gains in the mid-cap and small-cap indices are PSUs, financial services, infrastructure, and energy companies. Some of the top contributors to the gains in the midcap index, which notched up nearly 36,36 points gains since January, were Hindustan Zinc, Macrotech Developers, JSW Energy, and Cummins India.

In the smallcap index, which gained 2,878 points, the contributors to the up-move were Indian Overseas Bank, Cochin Shipyard, Housing & Urban Development Corporation, Motilal Oswal Financial Services and Exide Industries, among others.