Small and Mid Cap indices and stocks have been on the bull run since early September 2013. There has been a sustained run up in the stocks for the past 19-20 weeks without any significant correction so far.
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While the BSE Small Cap Index has risen about 32% and BSE Mid cap index has risen 33% over this period, the Sensex rose 23%.
The Q3 results season has begun. History tells us that we have seen stocks rise ahead of the results hence there is a good chance of them correcting before or post the results.
Further IIP numbers of November 2013 have been disappointing although there is no clear correlation between the IIP numbers and the Sensex. Even the export growth for the month of December 2013 has fallen to 3.5% as against 6.2% growth for the period of April 2013- November 2013.
Hence taking some trading profits off the table especially in small cap and mid cap stocks seems a wise idea at this point. Some profits on investment positions also may be taken.
The markets could correct for 5-7 weeks and then make a base for the next up move.
Written by Deepak Jasani
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