Index up, but Portfolios down - What's happening?

Markets Overview

It was a mixed week for the markets — one that clearly exposed the divide between the resilient large caps and the bleeding small caps. While the Nifty 50 managed to stay relatively steady, the small and micro-cap segments continued to face heavy selling pressure. This widening divergence has created a peculiar scenario where the headline index looks stable, but a large section of investors are sitting on portfolio losses. The RBI’s interest rate cut this week brought some cheer, but its impact was largely restricted to large caps, with liquidity yet to trickle down meaningfully into the broader market. In essence, this is a market of two realities — the strong getting stronger at the top, and persistent pain underneath.

Nifty daily chart reflected this churn clearly. The first few sessions of the week saw continued weakness, but the tide turned sharply on the final trading day. Triggered by the RBI’s rate cut, the Nifty staged an impressive reversal, erasing all its earlier losses in one strong session and closing the week virtually unchanged at –0.06%.

Latest Daily Byte

This marks the end of the week, and it wasn’t a great one for the broader market overall. However, for the large caps and some larger mid caps, it turned out to be not such a bad day. The RBI monetary policy announcement came in the morning and included a quarter percent cut in the interest rates. This move was somewhat expected, I would say, but not entirely. The market did get surprised.

Before the announcement, we were trading pretty much in negative territory, but post the announcement, we quickly moved into the green. So, there was definitely an element of surprise for the market participants.

Interest rate sensitive stocks certainly climbed, and some sectors like real estate jumped up initially but could not really sustain that momentum on the higher side. The other segment of the market, which is basically small caps and micro caps, is now sitting in some deep, deep, red territory. Micro caps actually lost a major support level on the charts, and small caps are almost there as well.

This creates a very divided market where the top end of the market is inching up while the bottom end of the market is falling down like a rock. This situation has led to a sort of imbalance being created in the market, currently with no immediate domestic triggers..

Rebalance Update for the week