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Thursday, January 24, 2013

Midcap Stock Carnage: Technical View!

Midcaps stocks were once again butchered today and today's fall was almost a 4% fall in midcap indices.

Several good quality midcaps like HDIL are down 37% this week; others like A2Z maintenance, Tulip are down by 30%; IVRCL, Everonn, Zylog, Crew BOS, SREI are down by 25%; Midfield, Marg, Opto, Logix have fallen by more than 20% each. Just to take a example of huge midcap crash this week.

Several readers have sent in their queries asking if this fall is going to continue. Pls look at the charts below:

As you can see below, Nifty Midcap index has been in consolidation from past many months. It was unable to cross over the highs that were reached in Feb of 2012 and suffered a huge rejection from 2470 level. From 2470 in first week of Jan, 13, the fall has taken us to 2267 today. That is already a 10% fall in past few weeks with major part of fall coming in last three days.

However, the support is close by. 2220 will provide a strong support to midcaps, which will be tough to break. 2140 is another strong support close by. A lot depends on how Nifty is behaving.

Nifty strangely is still above 6000 and closed at 6025 today. Nifty is not willing to close below 6000 even and has great support at 5950 and is unlikely to fall lower than that. Most probably, Nifty will resume its upward journey after a lull of few days as if nothing happened in these few days!

This is a great divergence between top 50 stocks and rest of the stock universe.What this means is probably lot of ETF money is rolling in from FIIs and straight going to top 50 stocks without any value analysis whatsoever. This results in midcaps being short of capital and attention from investing community and available at great valuations with each decline.

However if the fall is 30% in 3 days, most of the value pickers will be wary of touching these scrips. That is the dilemma of stock investing. What is cheap is risky and what is not risky, is probably very expensive!


  1. Dear Sir,

    There was a knee jerk reaction in HDIL counter and everybody agrees that selling 1% stake by promoters should not be a sign of bankruptcy. Today Macquarie came out with her recommendation and as your good self rightly said in your blog. It’s time to buy HDIL at current level and I took this crash opportunity to enter as there is a good value.

  2. Hi ,

    Can you please suggest some good books for trading & speculation(not investments) for beginners.

    Thanks in Advance
    Rohit Sharma

    1. Hi Rohit,

      I will write a post on some good books on Trading.
      Look for books from Alexander Elder - Trading for a Living, Come into my Trading Room etc.
      Will give names of some more books.

  3. Hi sir ,

    I had doubt about Ramky Infra , as per SHP Institutional investors have reduced stake from 10.4% in Dec 2011 to 6.01% in Dec 2012. what do you think abt this ? Will this stock remain under pressure until they keep selling ? am holding ramky infra at 94 from last six months with a target of 200+ Didnt book any profits in the recent rally . Sir is my target of 200+ is possible or should i book profits in bull rallies between ?? i can hold for 1 more year sir please advice


    1. Hi Rahul,
      Yes, thats a tad bit negative news. But if you see promoter holding, thats holding strong for now and going up a bit, now at 67.76.

      If we see the charts, stock has fallen in a one way trend from 450, and now consolidating from last 6 months, with lows at 88. These lows are unlikely to break and 180 is possible for this scrip in next 6-12 months timeframe.
      You can do partial booking at 120, keep stoploss at 88.

    2. thank you sir yes the promoters have spent almost 5 crores i think last year to buy these shares it is very positive for investors

      Please sir as in above posts can you also suggest some good books for technical analysis for studying uptrnd & downtrnd thanks a lot

      please continue writing sir its very helpful for new investors like me i learned a lot from your website


  4. Hi Sir iam a regular reader of your blog & want to thank you for your guidance it is very helpful to investors like me.
    one request from my side - can you please cover credit policy ,inflation & gdp and their effect on market in future posts, now a days repo rate crr inflation all are in news but since i am not from finance background its difficult for me to understand the effects of cuts and why market goes up or down due to it which stocks to invest and which stocks to not when all these changes take palce. I think there would be many investors like me who find difficult in relate all these with investment and market trends.

  5. Hi Naren ,

    Can you please throw some light on Gujrat fluorochemicals (Purchase price 440 , CMP 280) & lovable lingerie (Purchase price 465,CMP 330).....should i hold them or switch to some another scrips...i am incurring huge losses in these two scrips.....How are the fundamentals ? Please suggest.

    Thanks in Advance


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