The best part about this market pullback from the lows of the August correction has been the breadth. Typically, after a sharp knock it's the large caps that bounce back first and mid-caps follow with a lag. This time it's different. Even as the Nifty wades through a sea of resistance to it's old highs, the CNX mid-cap index is virtually there. More importantly, the marquee liquid mid-caps, or more accurately the non-Nifty large caps, have moved well beyond their July highs. This is unusual and significant.
Reliance Capital hit an all-time high of 1,250 in July before the correction. Today, the stock is at 1,400. United Spirits was around 1,450 then, now it's 1,650. The entire power/ infrastructure space has been hitting new highs consistently. Neyveli is at 97, up from it's old high of 85, PFC at 195, Petronet back to 67 and JP associates at 955, a new all-time peak.
Not only does this indicate very high confidence in the market at this juncture, it is crucial for sentiment. While a few large caps like RIL, SBI, Bharti, Tisco are market movers, the role of liquid mid-caps as a barometer of market sentiment/confidence cannot be undermined. Stocks like IFCI, Reliance Capital, IDBI, Unitech have become sentiment leaders in their own right. An index comprising of these liquid names would have cruised to all-time highs long back. We are in a strong market; make no mistake about it. So many important stocks don't trade at new highs in a weak market.
This optimism has percolated to the micro-caps as well. The BSE small-cap index, in fact, was the first to hit an all time high early this week. Now, none of this is to say that a correction should be ruled out. Markets change course fairly quickly, as we all know. This is only to say that the empirical evidence suggests that the market is in the grip of bulls. August was when the innings got off to a rocky start, since then there has been a solid partnership between the large- and mid-caps. The bears need a wicket or two to get back into the game.
(The writer is Executive Editor, CNBC-TV 18)