Over two-thirds of BSE 500 stocks slip below 200-day moving average

In 2018, the BSE mid-cap index has corrected 13%, while the small-cap index has corrected over 23%

More than two-thirds of BSE-500 stocks have slipped below their 200-day moving average (DMA) following the recent sell-off in mid- and small-cap stocks.
 
The 200-DMA — nearly a year’s average of closing prices — is analysed by traders to understand the market sentiment. A fall below these levels indicates a weak trend.
 
Among individual stocks, Shankara Building Products and Infibeam Avenues are trading more than 60 per cent below their 200-DMA. Meanwhile, stocks like Adani Power, Linde India and Bata India have stayed above their 200-DMAs. Adani Power is trading 57 per cent higher, while Bata India is trading 25 per cent higher. As many as 196 of the top-500 stocks are trading more than ten per cent below their 200 DMAs.
 
According to analysts, unless the benchmark indices see a break-out from their narrow range, these stocks would find it difficult to cross their 200 DMAs.
 

“So far in January 2019, we have not seen any big move in Nifty 50. It is hovering in a range-bound territory between 10,700 to 10,900 levels. Markets are facing strong resistance and not able to cross the 11,000 levels. There is a huge sell-off for every 40-50 points of gain,” said Vikas Jain, senior research analyst, Reliance Securities.
 
Experts say mid-caps have a better chance of recovering than small-caps.
 
“Quality mid-cap stocks will do well once the outcome is clear. Once the event risk gets over, we will see mid-caps doing well and so one should look at quality mid-caps in every dip,” said Siddhartha Rastogi, managing director, Ambit Asset Management.

 
Markets could turn favourable for mid- and small-caps going ahead; that could lead to a more broad-based rally, say experts.
 
“Valuations, though not cheap, have moderated from the peak of CY17 and are now reasonable, especially in the mid & small cap space,” read IDFC Mutual Fund's market outlook.
 
In 2018, the BSE mid-cap index has corrected 13 per cent, while the small-cap index has corrected over 23 per cent.