US FOMC | Midcaps: We could see some profit taking ahead of the US FOMC meeting; midcaps likely to shine: Mohit Nigam

“We believe we may see some profit booking ahead of the US FOMC meeting, after which we may see further rallies as the overall trend is bullish. Any relief on the inflation side will further bolster investor sentiment. “, said Mohit NigamManager – PMS, Hem titles.


In an interview with ETMarkets, Nigam said, “We believe the outperformance of mid-cap stocks will continue as many mid-cap companies are generating healthy cash flows and are available at a reasonable valuation after previous corrections.” Edited excerpts:


A good week for Indian markets. Sensex, Nifty rose about 2%. What led to the price action?
Indian benchmarks outperformed major global market peers as investors continued to build confidence in the Indian economy. August was marked by strong FII buying. FIIs became net buyers almost after a year.

Even over the past week, strong buying has been seen by FIIs. In Nifty50

emerged as the top gainer with over 16% returns, followed by over 6% gains.



Among the sector indexes, Nifty IT emerged as the top gainer on the back of a surge in buying from Tech Mahindra.

Indian indices held up well on concerns about further aggressive rate hikes by the US Fed to curb the rising inflation situation.

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Will Nify50 be able to reach 18,000 and beyond in the coming week or could we see some consolidation ahead of the US Fed meeting?
The US Fed undertook four rate hikes during the year, raising the funds rate from 0.25% to 2.5%. The next US Fed policy meeting is scheduled for September 20-21, 2022.

At the recently concluded Jackson Hole symposium, US Federal Reserve Chairman Jerome Powell made it clear that interest rates would be higher for a longer period to fight inflation.

Although higher interest rates, slower growth and weaker labor market conditions will reduce inflation, he also mentioned that it will also cause difficulties for households and businesses.

The European Central Bank also raised interest rates by 75 basis points. The benchmark Nifty 50 index is up about 18% from its recent low of 15,183 on June 17, 2022.

We believe we may see some profit booking ahead of the US FOMC meeting, after which we may see further rallies as the overall trend is bullish. Any relief on the inflation side will further boost investor sentiment.

Small and mid cap stocks have outperformed Sensex over the past week. What is fueling the rally in this broader market space?
Last week, mid and small cap stocks outperformed large cap stocks. Compared to the lows of the previous week, the Nifty Midcap 100 index gave returns of around 2.02% and the Nifty smallcap gave returns of around 2.65%, while the Nifty 50 provided a yield of 1.68%.

Over the past few weeks, investor sentiment has changed after improving various economic data like inflation and GDP. India’s economic growth and economic recovery is boosting investors’ confidence to move their money from large caps to mid and small caps.

We believe the outperformance of mid-cap stocks will continue as many mid-cap companies are generating healthy cash flows and are available at a reasonable valuation after previous corrections.

What’s your call on Nifty Bank? What are the important levels to watch and the stocks that look interesting?
Despite the Covid crisis, Indian banks’ balance sheets have improved significantly over the past few years, with much higher capital and coverage ratios.

With an improving macroeconomic climate, we expect Indian banks to set the tone and grow. Since mid-August, Indian markets have outperformed the majority of their major international rivals, driven by the improving macroeconomic outlook and continued buying by overseas portfolio investors.

The banking sector has outperformed India’s benchmark Nifty50 over the past month, and now that the index has clearly crossed a significant physiological threshold of 40,000, we expect it to continue to do so going forward.

The best way to capitalize is through the big banks, which have greater liquidity and the ability to increase their share of the deposit market.

Cement stocks were in focus over the past week – and JKLakshmi was up around 20%. What should investors do? Time to take profits or wait for the downside?
In the long-term charts, both stocks showed strength after trading in a consolidation pattern for a year and in August they formed a large green price bar with large volumes which has broke the trading range of the last 3-4 months.

On the daily charts the stocks are also showing strength and now both stocks are poised for their new upward journey and from now on investors should hold these stocks for long term gains.

(Disclaimer: Hem Securities Ltd. and its associates, officers, directors, employees, persons employed as research analysts and their associates worldwide may from time to time hold long or short positions in the company(ies) mentioned. in this document.

(The recommendations, suggestions, views and opinions expressed by the experts are their own. These do not represent the views of Economic Times)