The Nifty SmallCap 100 is trading at a high P/B value of 6.7, and at least 128 smallcap multibaggers are trading above their 5-year average PE level. Companies in sectors like chemicals, consumer durables, energy, IT, and BFSI are overheated. The recent Q3 earnings season has added to concerns about expensive valuations for PSU railways, defence, and power stocks.
As elevated valuations cap the upside in the broader market, smallcap rally was subdued but steady with 52 stocks gaining in double digits during the week. Mid and smallcaps had witnessed strong rallies over the past few months thus making valuations a little stretched.
A significant part of this selling within the financial services sector was in private banks, particularly HDFC Bank, which is highly concentrated by FPIs.
Equity markets ended higher this week, driven by buying in select heavyweight indices and a fiscally prudent Budget. 52 BSE500 stocks gained in double digits, with NBCC as the top gainer. In the midcap segment, Indian Bank, Delhivery, and HPCL rose in double digits. Power Grid topped the Sensex pack. All eyes will be on the RBI s policy meeting next week, with analysts expecting the Central bank to maintain key interest rates. Technical analysis suggests that Nifty may face resistance at 22100-22200 levels.
RVNL was the top gainer in the smallcap pack with nearly 58% return, followed by Ganesh Housing Corp (50.4), Ircon International (37%), and MSTC (35%).