Mid-cap Index bounces back from major bottom

Mid-cap Index fell more than 8.5 per cent in May from high to low. Mid-cap index had started off with the retreat from its all-time high well before the benchmark indices on January 9, 2018. The index had attempted a bounce in March and April but retreated yet again in May. Indian stock markets, majorly the broader indices, have very well-epitomized the Street axiom of “Sell in May and Stay Away”.

Rupee depreciation and simultaneously the rising crude oil prices weighed on the stock prices where Mid-cap and Small-cap marked their worst May month performance in the last 12 years amid overall sell-off or a shift from broader to the blue-chip (relatively more liquid and less volatile stocks). Moreover, the mutual fund houses too had discarded these shares because of redemption issues.

Nevertheless, Mid-cap index is off its provisional low level and has bounced back from its major support at 15,565. After consolidating for three daily sessions at the low levels, Mid-cap index has surged for two consecutive days, hitting near 38.2 per cent retracement of the prior downward rally in May 2018. The reasonable volumes and 14-period RSI positive crossover in the over-sold zone suggested provisional bottom fishing for the index. The index price however, is still lying below its 100 and 200-day EMA level. The index may see a turnaround and may fall below its current support level if conditions worsen. However, if the low serves as a Double bottom and the index continues to surge, we hold 16,135-16,310 as the near-term resistances.