Nifty rally remains narrow large-cap led bounce, says analyst
Fewer than 40 per cent of Nifty 500, midcap and smallcap stocks are trading above their 10-day moving averages.
The Nifty's 2 per cent rally in October may be masking underlying weakness in the broader market, according to the Economic Times. Anand James, Chief Market Strategist at Geojit Investments, said the recovery appears to be a narrow large-cap-led bounce rather than a broad-market revival.
Data shows that the proportion of stocks above their 10-day moving averages has declined recently. In the Nifty 500, 36.4 per cent of stocks are above this level, while the figures for Midcap 150 and Smallcap 250 are 34 per cent and 28.4 per cent respectively.
The weakness is more pronounced on a 20-day timeframe. Only 27.8 per cent of Nifty 500 constituents, 27.3 per cent of Midcap 150, and 18.8 per cent of Smallcap 250 are trading above their 20-day moving averages. In the smallcap segment, over 80 per cent of stocks are trading below this average.
In contrast, the Nifty IT index rose approximately 18 per cent in October. James noted that this move looks like the early stages of a potential leadership cycle rather than just a technical rebound, supported by strength in companies such as Infosys, Coforge, Persistent Systems and Wipro.
Regarding Swiggy, James observed that while the stock has defended its October low, more price action is needed to confirm a turnaround. However, he noted the stock is nearly 13 per cent away from its 10-day simple moving average, which could signal a potential upmove next week.