If Monday was all about the Nifty 50, Tuesday was all about the Midcaps and Smallcaps. As fast as these stocks went higher, they came off those highs on Tuesday equally fast if not more.

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93 and 96 out of 100 are impressive scores in any competitive exam. But these are certainly not impressive numbers if they are the number of stocks on the Midcap and Smallcap index respectively that ended with losses on Tuesday.

A glance at the above chart which shows the top losers on the Nifty Smallcap index would show that all of these names are some of the high-flying stocks that saw stellar returns over the last few trading sessions, particularly Cochin Shipyard and Rail PSUs like RVNL and RITES.

Both the broader market indices ended the day with their biggest drop of 2023. This, despite analysts like Mark Matthews telling CNBC-TV18 that the planets are aligned for India and that the markets can move even higher from these levels.

Is There More Pain For The Broader Markets?

Dinshaw Irani of Helios Capital still finds value in smallcap stocks, although he would prefer staying away from midcaps.

"The smallcap is an ocean. I think that's where the value lies today. Beyond the index, but obviously, the way the money was flowing into these sector specific stocks, in mutual funds, that's why you're seeing this kind of frothiness in index specific stocks as such. So I would rather stay away from the midcaps - smallcaps there is still a lot of flavor left," he said.

On the other hand, Devang Mehta of Spark Private Wealth Management does not see much downside except for any unforeseen event.

"One needs to be a bit cautious, caution has to be raised on the valuation front but overall, I don't think there is much downside here except for any six sigma event, which nobody knows about. But I don't see a huge correction that should be on the anvil because of just 20,000 as a psychological mark being reached, it's just a milestone in the journey according to me," he said.

"Overall, we expect the focus to shift from mid and small caps to large caps in the near term, as investors may turn cautious on the broader market," said Siddhartha Khemka of Motilal Oswal.

What Do The Nifty 50 Charts Indicate?

The Nifty 50 ended little changed in Tuesday's session, although it failed to hold on to the 20,000 mark for the second day in a row. The divergence between the Nifty 50 and the broader market on Tuesday was the highest since April 2020.

Rahul Sharma of JM Financial believes that 19,800 or maybe 19,650 levels on the Nifty 50 in the best case scenario would be good re-entry levels for the rest of the month. "I think this is still a bull market and a very strong primary uptrend. "So clearly look to re-enter at key suppport levels and book profits in the midcaps and smallcap indices where a phenomenal rally has taken place over the last few weeks," he said.

Interestingly, Sharma was the first chartist to projet a 1,000-point rally on the Nifty 50 index in the September F&O series.

Atul Suri of Marathon Trends PMS said that the market is nowhere near the bubble territory. With the Nifty 50 having risen only 15-16 percent on a two-year basis, he said there is no reason why the index cannot have another 8-10 percent rally this year. "We are currently midway in the market upcycle," Suri said.

What are the F&O Cues Indicating?

Nifty 50's September futures added 0.5 percent and 50,550 shares in Open Interest. They are now trading at a premium of 53.1 points from 40.35 points earlier. On the other hand, the Nifty Bank September futures shed 0.6 percent or 10,740 shares in Open Interest. Nifty 50's Put-Call Ratio is now at 1.18 from 1.47.

Indian Energy Exchange (IEX) and NALCO are in the F&O ban list from Wednesday's session, while PNB is out of the list. BHEL, Indiabulls Housing Finance, Delta Corp, Hindustan Copper, Manappuram Finance, SAIL, Chambal Fertilisers, and India Cements continue to remain in the F&O ban list.

Nifty 50 on the Call side for September 14 Expiry:

For this Thursday's expiry, the Nifty 50 call strikes between 20,100 and 20,600 have seen Open Interest addition. The highest Open Interest addition was seen in the 20,500 and 20,600 strike.

Nifty 50 on the Put side for September 14 Expiry:

On the downside, while the Nifty 50 Put strikes of 19,250 and 19,500 have seen Open Interest shedding for this Thursday's expiry, the 19,600 strike has seen Open Interest addition.

Lets take a look at the stocks which saw fresh short positions on Tuesday, meaning a decrease in price but increase in Open Interest:

Here are the stocks that saw unwinding of long positions on Tuesday, meaning a decrease in both price and Open Interest:

What Next For the Nifty & Nifty Bank?

"Technically, the medium-term texture of the market is still positive, but in the near future, we could see rangebound activity," said Shrikant Chouhan of Kotak Securities. He sees 19,900 - 19,850 as key support levels for the Nifty 50 bulls, while 20,100 - 20,150 will act as resistances on the upside.

Rupak De of LKP Securities said that put writers on the 19,900 strike prevented the Nifty 50 from further declines. Over the short-term, the Nifty 50 is expected to maintain its strength as long as it remains above 19,780, while a decisive move above 20,100 - 20,150 can propel the index towards 20,500.

The Nifty Bank index ended little changed on Tuesday, still managing a close above the 45,500 mark.

Call writers have significantly increased Open Interest at the 46,000 strike of the Nifty Bank which will not act as a strong resistance, said Kunal Shah of LKP Securities. On the downside, support is seen at levels of 45,200, holding which, a recovery towards 45,600 - 45,800 could be seen on the index.

Here are the stocks to watch out for ahead of Wednesday's trading session:

Tata Motors: Company tells CNBC-TV18 that the festive season has been strong so far and that they have seen month-on-month growth. Diesel sales account for 12-15 percent of Passenger Vehicles.

Infosys: Bags order from Europe's largest retailer STARK Group for digital transformation using AI-first set of services.

KEC International: Wins new orders worth Rs 1,012 crore across various businesses.

RITES: Signs MoU with Caminho De Ferro De Mocamedes, Angola for cooperation in the development of Railways and related infrastructure, including the supply of rolling stock.

Avenue Supermarts: Opens a new store in Tamil Nadu, taking the total store count to 334.

Foreign investors were net sellers in the cash market on Tuesday, while domestic investors remained buyers.

What Are The Global Cues Indicating?

Asian equities have opened mixed in mid-week trading as investors assess key economic data out of Japan and South Korea.

The Nikkei 225 is up for the fourth day in a row, gaining 0.2 percent, as is the Topix. The Kospi is flat, while the Kosdaq is down 0.7 percent. Futures on the Hang Seng are pointing to a positive start to trade.

South Korea's unemployment rate in August fell to the lowest since June 1999, while corporate confidence in Japan declined in September.

Overnight, US equities fell ahead of key inflation numbers to be reported later this evening.

The Nasdaq snapped a three-day losing streak, ending a percent lower. The drop was also led by Apple, shares of which declined nearly 2 percent on the day it launched a new series of iPhones and a whole host of products.

Dow Jones ended flat, while the S&P 500 fell 0.6 percent.

First Published:Sept 12, 2023 8:59 PM IST