Investors must not pre-empt bottoms for the mid and smallcap space

Bears had completely gripped the indices this week. Technical charts are looking weak which suggest that there will be further declines among the bourses.

Investors must not pre-empt bottoms for the mid and smallcap space. Prudent trading and investing calls for restraint and investors must wait for signs of revival before jumping into a quality mid and smallcap stocks, Umesh Mehta, Head of Research, SAMCO Securities, said in an interview with Moneycontrol’s Kshitij Anand.

Q) Bears remained in control throughout the week as they pushed the Nifty50 below crucial support levels, down more than 1 percent for the week. It's July expiry was the lowest since October 2018. What do the technicals suggest as crucial support and resistance levels for the coming week?

A) Bears have completely gripped the indices this week. The technical charts are looking weak which suggest that there will be a further decline of the bourses.

However, the Nifty is expected to see some bounce-back in the near term. It will take strong support at levels  11,200 and there will be resistance at levels around 11,450.

Q) What are the crucial factors which led to a fall on D-Street, despite strong US markets hitting fresh record-highs in the week gone by?

A) The US markets have been performing exceptionally well by hitting fresh record highs while our very own domestic markets were in the red. The liquidity squeeze is one of the many reasons which led to the fall.

A lack of trust on the Street called for caution, which caused FPIs to remain net sellers of equities in the month of July.

Also, the earnings season is not adding cheer as pessimistic commentary by management is also dissuading investors from taking fresh bets in the market.

Q) What are the important events which investors should watch out for both domestic and global?

A) Although interest rates are supposedly the most observed event, they have no short-term bearing on the markets.

At best, a knee jerk reaction will drive the markets higher to create openings, but domestic issues will largely guide the course for the markets.

Q) Carnage was seen in the small & midcap space – nearly 500 stocks hit a fresh 52-week low on the BSE. Is it time to catch the falling knife?

A) Investors must not pre-empt bottoms for midcaps and smallcaps. Prudent trading and investing calls for restraint, and investors must wait for signs of revival before jumping into a quality mid and smallcap stocks.

Q) In terms of earnings – which results surprised the Street and which ones disappointed?

A) Jubilant Foodworks disappointed the Street with a sales growth of a mere 4 percent in Domino’s Pizza in comparison to a strong 25.9 percent last year.

PVR, on the other hand, reported a 66 percent decrease in its bottom line, despite a 26 percent rise in net sales due to higher expansion in the number of screens.

On the other hand, South Indian Bank surprised everyone with a 3-fold jump in its PAT due to higher interest income and a reduction of its provisions for bad loans.

Disclaimer: The views and investment tips expressed by investment expert on Moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.  

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