The headline indices Sensex and Nifty50 hit their fresh 2016 highs last week with stock market investors shedding Brexit fears and taking into account favourable progress of monsoon, pay hikes for government employees and a couple of other policy measures at home.
While benchmark indices may have recovered all of their losses since over 600-point fall on Brexit day, it was the broader indices that outperformed Sensex and Nifty during the same period.
Sensex and Nifty added nearly 3 per cent last week, while the BSE Midcap and BSE Smallcap indices gained over 5 per cent and 6 per cent, respectively.
Among 261 midcap stocks, 40 hit their fresh 52-week highs.
Of them, 25 stocks gained in excess of 5 per cent, while 12 stocks such as Motilal Oswal, DCM Shriram, Dalmia Bharat and Atul Ltd gained between 10 per cent to 18 per cent.
Among 758 smallcap index stocks, 91 hit their fresh 52-week highs and gained up to 27 per cent. 12 among these 91 stocks, added over 15 per cent in just a week.
A2Z Infra Engineering (27.10 per cent), Jay Shree Tea & Industries (20.87), Tata Coffee (15.04 per cent) and Dhampur Sugar Mills (19.19 per cent) were the major smallcap stocks to hit their fresh 52-week highs last week.
Sectorally, stocks from the automobiles, agriculture, finance, chemicals and construction sectors were the major movers during the week.
"Domestically, monsoon continues to progress well. Apart from this, approval to the recommendations of 7th Pay Commission is expected to support consumption growth in the economy," said Dipen Shah, Sr Vice President & Head PCG research, Kotak Securities.
The pay hikes for government employees will amount to Rs 1.02 lakh crore, or nearly 0.7 per cent of GDP and will further lubricate the economy in the spending- investing cycle. In this backdrop, stocks of two wheelers, real estate firms, consumer durables and consumer staples are likely to do well in the medium term.
Shah of Kotak also said that on the investment side, government capex continues to remain strong and companies are indicating optimism on revival of private sector capex.
"These factors should support economic growth, going ahead, which bodes well for the long term performance of the equity markets," the expert added.
Govt also created a level playing field for online and offline retailers by amending Shops and Establishment Act to allow shops to remain open 24X7 subject to certain rules.
National Mineral Exploration Policy cleared by Cabinet is another policy push that will incentivize the participation of private companies in exploration.
"National Mineral Exploration Policy cleared by Cabinet will open up huge untapped potential of up to 90 per cent hitherto not explored, to the private sector for exploration and mining, a big milestone in itself," said Jimeet Modi, CEO, SAMCO Securities.