Decoding the Technical Outlook of Nifty Midcap and Smallcap index!

The Nifty Midcap-100 and Smallcap-100 indices outperformed the benchmark index in the post-Covid rally. The Midcap index rallied over 209% and the Smallcap jumped a staggering 276% from the March 2020 lows. During the same period, the NSE benchmark Nifty50 index advanced 148%.  

On May 16, 2023, Nifty Midcap 100 index made a fresh 52-week high. Meanwhile, the Nifty Smallcap index is still trading 17% below the all-time high, which was registered in January last year. Talking about the Nifty Midcap index, in case a close happens at the current level of 32860 at the end of this week, it will record the highest closing. The previous lifetime closing high was 32503.50. After declining 25 per cent from the previous all-time high, it formed a higher low and tested the previous highs. Its relative strength is also higher than the Nifty. The RSI shifted its range into the strong bullish zone three weeks ago. The RSI on all time frames, daily, weekly and monthly is above the 60-mark. The weekly MACD is above the zero line and the histogram shows a strong bullish momentum. The index cleared all the resistances. In any case, it breaks out of an 82-week consolidation, which can be considered as Stage-1, which will result in another 25% rally in the medium term. The extension target in the medium term is placed at 42728. The long-term (24 months) target is placed at 47728. In a bear case scenario, if the index falls below the level of 31576, it will get the first signs of reversal. It may test level of 30668 on the downside and only on a close below this level, the index will decline below the prior major swing low of 29200 and enters into the confirmed downtrend.  

The Smallcap-100 index declined by 34.39% from its lifetime high and retraced 50% of the fall. Currently, it is trading near the previous swing highs, placed at 10180.55. It needs to form a higher high above this level, to get a confirmation of an uptrend. Above this level, it may face resistance at the level of 10465, which is a 61.8% retracement. The RSI just shifted its range into the strong bullish zone after 69 weeks on the weekly time frame. The weekly MACD line has also moved above the zero line, which is a sign of stronger bullish momentum. It is trading above the 10, 30 and 40-week moving averages. All short and long-term averages are in an uptrend. It is important to cross the previous swing highs to transition into a strong bullish trend. In the bear case scenario, if it falls below 9695, it will give the first signs of weakness. 

Overall, the Nifty Smallcap index above the level of 10180.55, will attempt to scale towards a fresh high.