June is the best month for the wider market this year. As of Friday, nearly 90 percent of the top 500 stocks had made a profit for the month. About 85 per cent of the 50 Nifty components have made positive progress. This exacerbates tensions between India and China and is downgraded by the Moody’s Investors Service during the beginning of the month, despite several headwands such as the growing Covid-19 infections.
Experts said the work it has done for the markets is favorable global investor sentiment and an encouraging flow into emerging markets following the stimulus measures taken by central banks.
The broader market Nifty Smallcap 100 index rose 16 per cent in June, while the Nifty Midcap 100 is currently up 11 per cent after giving some gains. Both indices have beaten the benchmark Nifty, which rose 7.6 percent month-on-month.
Experts say the benchmark outperformed the small and midcap stocks in April and after some consolidation in May the rally outpaced the broader markets.
The market saw the June 2020 drop from largecap to mid- and small-cap. This month, we saw an advance decline of more than 2 to 1 on four consecutive days between 18 June and 23 June. This happened for the first time since June 2014. There was also an advance-to-decline ratio as of Friday, the highest monthly readings since May 2009. Such advances are occurring due to the rapidly slowing economy and poor visibility of the beginning of recovery in the background. The timing is a bit surprising, ”observed Deepak Jasani, Head Retail Research, HDFC Securities.
The broader market rally has seen some cracks, with the Nifty Midcap 100 and the Nifty Smallcap 100 down 1.6 percent and 1.4 percent, with the Nifty 50 down only 0.7 percent on Monday. Despite this month, the return scorecard is encouraging for the broader market for the month.
Some experts doubt the gains posted by Small and Midcap in this month.
Several speculators in the retail segment have participated this month and are chasing small-cap stocks. If you look at the previous week, both domestic investors and foreign portfolio investors have had a lot of institutional sales. And everyone knows that the June quarter will be a washout, tensions are rising along the Indo-China border, and Covid-19 cases are increasing. Despite these factors, if people are investing money, it has more to do with speculation than any fundamental reason. There is nothing in the market that justifies interest in small and midcap stocks. This trend is unlikely to continue, ”said G. Chokkalingam, Founder, Equinomics.
A handful of stocks in the Top 500 universe have doubled this month. Some of them include Future Consumer, Shree Renuka Sugars and Dish TV India. While the other nearly three dozen stocks have gained over 40 per cent. Most of the 50 stocks which have suffered losses have been in single digits.