The monthly average Advance-Decline Ratio (ADR) of all BSE stocks remained robust, staying above one for two consecutive months. In May, the ratio was at 1.06, while it reached 1.5 in April, marking the highest point since June 2020. However, as of Monday in June, the ratio has decreased to 0.86.
The Nifty Midcap 100 index achieved a record high in May, increasing by 3.2% during the month, while the Nifty Smallcap 100 index rose by 0.7%. In contrast, the benchmark indices Nifty and Sensex fell by 2% and 2.8%, respectively. This divergence highlights the stronger performance of mid and smallcap stocks compared to large-cap stocks.
According to Jay Vora, a technical analyst at Mirae Asset Sharekhan, domestic investors continue to inject capital into equities, with midcaps typically attracting retail investors. However, large-cap stocks have been adversely affected by foreign sell-offs.
“The domestic investors continued to pump money into equities and midcaps typically attract retailers.”
Jay Vora, Technical Analyst, Mirae Asset Sharekhan
Nilesh Jain, VP-head of Technical and Derivative Research at Centrum Finverse, noted that while the benchmark Nifty and the smallcap index remained 8-9% away from their peaks in May, the midcap index reached a new high. This divergence has led to a stronger Advance-Decline Ratio compared to the benchmark Nifty.
Vipin Kumar, AVP Equity Research & PMS at Globe Capital Market, mentioned that the midcap index is holding above its breakout levels from May, and momentum is also building in the smallcap index. He anticipates that the Nifty Midcap 100 could extend gains to 63,500 levels, while the Smallcap 100 index may test its record high around 19,600 in June.
“Benchmark Nifty and the smallcap index remained 8-9% away from their peaks in May, while the midcap index scaled a fresh new high in the month.”
Nilesh Jain, VP-head of Technical and Derivative Research, Centrum Finverse
Background
The Advance-Decline Ratio is a key indicator of market breadth, reflecting the number of advancing stocks versus declining ones. A ratio above one suggests a strengthening market, often driven by investor confidence and economic factors. Historically, mid and smallcap stocks have been more volatile but offer higher growth potential, attracting retail investors.
The continued strength in mid and smallcap stocks suggests a potential shift in investor focus away from large-caps, which are currently under pressure. Monitoring the performance of these indices in the coming months will be crucial for investors seeking opportunities in the Indian stock market.
