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Sensex, Nifty End Lower For Second Day As TCS, Infosys Drag: Market Wrap

The dominant trend in the market this year is the huge outperformance of the mid and small caps, according to VK Vijayakumar, chief investment strategist at Geojit Financial Services. “While Nifty is up only 8.82% year-to-date, the Nifty midcap index and Nifty Smallcap index are up 33.38% and 41.66% year-to-date.”

“It is important to understand that the Nifty is depressed by the poor performance of banks, which have the largest weightage in the Nifty. The Nifty Bank index is almost flat this year, with measly growth of 0.87%,” Vijayakumar said.

The broader markets outperformed their larger peers. The BSE Midcap ended up 0.13%, while the SmallCap closed 0.14% higher.

Twelve out of the 20 sectors compiled by BSE Ltd. advanced, while eight sectors declined. BSE IT fell the most, while Capital Goods rose the most.

The market breadth was split between buyers and sellers. About 1,805 stocks rose, 1,872 stocks declined, and 137 remained unchanged on the BSE.

Banks are underperforming despite very good results because they are overowned, and sustained FII selling is weighing on bank stocks. Mid- and small-cap stocks are under-owned, and retail exuberance is largely driving these stocks. There is no valuation comfort in the broader market, but valuations are fair in large caps, according to Vijayakumar.

“Therefore, the next leg of the rally, driven by institutional money, both foreign and domestic, will be driven by large caps,” he said.