Nifty Smallcap 100 touches new record high, gains over 2.4% in 3 sessions – here’s why

The Nifty Smallcap 100 index continued its winning streak for the fourth consecutive day on Wednesday, reaching a new all-time high of 16,822 points with a gain of 0.80%. Over the past three trading sessions, the index has surged from 16,270 points to 16,687 points, marking a gain of 2.46%.

In today's trading session, eight constituents of the index reached new 52-week highs. Data Patterns (India) emerged as the top gainer, recording a gain of over 10%. Following closely are Tanla Platforms and Great Eastern Shipping Company, both currently trading with gains exceeding 5%.

Meanwhile, benchmark indices such as the Nifty 50 and Sensex were also trading in the green in today's session, extending their bullish trend for the fourth consecutive day. In the last three sessions, the Nifty 50 has climbed 1.69% to 22,368 points, while the Sensex has rallied by over 1.70%.

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The recent uptrend in Indian equities has been attributed to favorable global cues and a decline in crude oil prices, with the oil market seemingly unaffected by the potential impact of additional sanctions on Iranian oil. Moreover, concerns have eased as both Iran and Israel have indicated a reluctance to escalate tensions further, following limited exchanges of strikes earlier this month.

In March, small-cap stocks suffered as concerns over high valuations prompted regulatory scrutiny, leading mutual fund houses to conduct stress tests every 15 days.

In April, it has shown a significant recovery, with a return of 9.79% thus far. Retail investors have been focusing on mid-and small-cap stocks in their portfolios, seeking multibagger returns, as the likelihood of large-cap stocks delivering such returns is comparatively lower due to their established market positions and elevated valuations.

In FY24, the Nifty Smallcap 100 index surged by 76.15%. Over 12 months, the index ended on a positive note in 10 months, with November seeing the highest monthly increase of 12%. Notably, the index sustained an average return of 5% during these 10 months.

Meanwhile, the U.S. manufacturing activity dipped to a four-month low of 49.9 in April, as reported by the S&P Global Flash U.S. Composite PMI, signaling contraction when below 50.

Also Read: Business activity grew at fastest pace in 14 years in April, HSBC survey shows

This has bolstered optimism for a rate cut by the US Fed. Following the manufacturing data, the yield on the 10-year Treasury fell by 2.1 basis points, while the yield on the 2-year Treasury note dropped by 4.4 basis points.

Additionally, economic data scheduled for release throughout the week may provide insights into the economy's performance and could influence Federal Reserve policymakers' decisions ahead of their meeting from April 30 to May 1.

This data includes the Fed’s preferred inflation measure, the personal consumption expenditures price index for March, set for release on Friday, as well as the first-quarter gross domestic product reading, scheduled for Thursday.

Also Read: India needs 8-10% growth over next decade to reap demographic dividend: RBI

Back in India, in its April bulletin, the RBI stated that inflation in India eased to 4.9% in March, down from an average of 5.1% in the previous two months. However, there are concerns about potential inflation risks in the near term due to extreme weather events and prolonged geopolitical tensions, which may lead to volatility in crude oil prices.

Policymakers encounter difficulties when addressing high inflation resulting from supply shocks because it's challenging to determine in advance the nature of these shocks—whether they're permanent or temporary—and whether they'll lead to secondary effects.

Disclaimer: We advise investors to check with certified experts before making any investment decisions.