A strong smallcap rally is coming. Here's clue

Mumbai: A tearaway rally in small-cap stocks could be in the offing with a technical indicator pointing to near-term strength. The Nifty Smallcap 100 index formed the so-called Golden Crossover on Monday for the first time in seven years, which has raised the possibility of sharp gains in these stocks in the near future.A Golden Crossover forms on a chart when a stock or an index’s short-term moving average crosses above its long-term average. On Monday, Nifty Smallcap 100 Index’s 50-week moving average (WMA) crossed the long-term 200-WMA.“Golden Crossover indicates a change of trend in a sustained way... whenever a Golden Crossover happens one should wait for two-three weeks for confirmation and if crossover sustains, we may see another 15-20% return in the short term,” said Rajesh Palviya, head-technicals and derivative at Axis Securities.In the first week of July 2014, the 50-WMA of the Nifty Smallcap 100 index crossed its 200-week moving average. The index was quoting at 5,518 then. From that level, the index moved up almost 63% before dropping in early 2018. 82927933The Nifty Smallcap index rose 1% to close at 9,179 on Monday.“There is a chance Nifty Smallcap 100 may attempt to cross its lifetime high of 9,656 going forward,” said Palviya.Aarti Drugs, Balrampur Chini, Amber Enterprises, Blue Dart, CEAT, CDSL, Kajaria Ceramics and India Cement are among Palviya’s top picks in the small-cap space.On March 30, the Nifty Midcap 100 index formed the golden crossover pattern for the first time in seven years. Since then, the index, which was at 23,609, has gained nearly 8.4%.Nifty Smallcap 100 index is up 29.5% so far in 2021 as against the 22.4% upmove in the Nifty Midcap 100 index and 8.7% gains in the benchmark Nifty.Abhilash Pagaria, senior manager, Edelweiss Alternative Research, said the small-cap index is likely to hit record highs soon.“There is strong momentum in both smallcaps and midcaps. The midcap index is already at lifetime high but the smallcap index can also touch lifetime highs. Small- and mid-caps can outperform largecaps," said Pagaria.

from Economic Times https://ift.tt/3veRT66