The Nifty Midcap 100 index crossed the 40,000 mark for the first time on Tuesday.
The gauge for the performance of leading midcaps ended at 40,254, following a gain of 1.1 per cent. The latest 5,000-point — nearly 15 per cent— up-move for the 100-stock index has taken less than three months. The index closed above 35,000 for the first time on June 16.
The benchmark Nifty50 and Sensex rose, too, for a third session in a row. The Nifty50 ended at 19,574, up 46 points or 0.24 per cent. The Sensex finished at 65,780, up 152 points or 0.23 per cent.
The broader markets have sharply outperformed the benchmarks this year. The Sensex is up around 8.1 per cent year-to-date, while mid and smallcap gauges have risen 27 and 31 per cent, respectively.
Following the sharp gains, most stocks in the broader markets have turned expensive compared to their historic valuations.
A report by ICICI Securities this week highlighted that the population of “investable value stocks” has diminished sharply.
“As the broader market rally continues, the number of stocks with the minimum quality attribute of trailing return on equity of more than 14 per cent and trading at earnings yield more than the bond yield has dropped from 171 to 104 within the universe of the top 1,000 stocks by market capitalisation,” the report highlighted.
But positive macro data has aided the rise of the equity markets in the past few trading sessions. Data released last week showed that India's economy grew fastest in four quarters -- at 7.8 per cent in the April-June financial year 2023-24 (FY24). India’s manufacturing sector activity continued to expand in August. The S&P Global Purchasing Managers' Index (PMI), a gauge for manufacturing sector activity, rose to a three-month high of 58.6 in August, which was the 26th month in a row when the PMI was above 50. A measure above 50 separates expansion from contraction.
“The increase in the index for the August PMI survey clearly elucidates that domestic demand remains solid, as well as external demand turned out to rise solidly for the month,” said Centrum Economic Research.
Similarly, India's services activity continued to expand in August, though slower than the previous month. The services PMI fell to 60.1 in August from 62.3 in July. The services PMI has been above 50 for 25 consecutive months.
"Growth rates for new orders remain elevated. Services firms indicated the sharpest upturn in new export business which acted as a catalyst for firms to expand their workforces, as well as output,' said Deepak Jasani, head of retail research, HDFC Securities.
Global markets were listless after Federal Reserve Governor Christopher Waller said the latest economic data shows officials can proceed carefully with interest rate hikes.
Economic data from the US and Europe, and statements of central bank officials from the developed world this week will give further cues to the markets.
"The Nifty50 has reached closer to the resistance of 19,650 and needs participation from banking to surpass the same. We feel traders should maintain caution in stock selection citing overbought indications, especially in the midcap and smallcap space,' Ajit Mishra, V-P-technical research, Religare Broking.
The market breadth was positive with 2,085 stocks advancing and 1,599 declining. Close to two-thirds of Sensex stocks gained. Infosys gained 0.96 per cent and contributed the most to Sensex gains, followed by ITC, which rose 1.21 per cent. Foreign portfolio investors (FPIs) were net sellers worth Rs 1,725 crore, according to provisional data from exchanges.