Retail investors, according to stock market experts, primarily invest in mid-cap and small-cap stocks, while the current market rally is primarily driven by large-cap stocks. As a result, retail investors' stock portfolios have yet to recover from the losses caused by the Russia-Ukraine war. They claimed that the recent market rally is being driven by stocks that have underperformed in recent years and were either dropped or ignored by retail investors during the recent sell-off.
Vishal Wagh, Research Head at Bonanza Portfolio, highlighted the reasons why retail investors' stock portfolios have not benefited from the recent rally "This is a natural market tendency. Retail portfolios fail to outperform when the mid-cap and small-cap segments underperform. There are a few mid-cap and small-cap stocks that are doing exceptionally well. However, due to their poor performance in recent years, these are not included in the portfolio. PSU basket defence stocks, for example. In any case, once they start gaining, this type of stock has already been booked out. As a result, allocation is a major issue at this point."
According to a Bonanza Portfolio expert, allocation is based on historical performance. Because IT stocks performed well in the previous rally, everyone is looking for bottom fishing in the sector, but as PSUs gain traction, they are being removed from portfolios due to poor historical performance. Many public sector stocks have returned more than 50% in the last few months.
A catch-up rally is expected ahead of the Union Budget 2023. According to Pravesh Gour, Senior Technical Analyst at Swastika Investmart, "The market's overall outlook is bullish, and there are no signs of a major correction, so mid- and small-cap stocks may see a catch-up rally in the coming days. In general, FII flows in December were tepid, with stock-specific outperformance. We are approaching the budget, and we can expect a pre-budget move in many pockets because this will be the Modi government's final full-fledged budget before the 2024 general election."
According to Rajesh Bhosale, Technical Analyst at Angel One, "As geopolitical tensions loomed in the background and investors and traders preferred safe bets, the rally was primarily driven by banking space and front line counters. However, the Nifty Mid-cap 100 is now in an interesting position, and with the Nifty 50 about to set a new high, we are seeing investor/trader confidence return, which is likely to drive strong traction in this basket as well."
Angel One's Rajesh Bhosale commented on segments that may fuel buying interest in small-cap and mid-cap indices "Power and OMC demonstrated strong momentum at the end of the week, and these segments are expected to maintain their momentum in the coming week. Traders can profit from intra-week dips in this segment."
On Friday, the BSE Small-cap index closed at 29,201 points, about 2100 points below its all-time high of 31,304. The BSE Mid-cap index closed at 25,595 points, nearly 850 points below its record high of 26,430 points.
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