Stock specific unwinding leading to underperformance in midcap and small cap

Nifty registered a new record of 22500 during last week, but it witnessed some profit booking at the start of this week and ended the day above 22300 with a loss of about three-fourths of a percent. 

In Monday’s session, our markets witnessed profit booking at the start of the week where the small cap index corrected by a couple of percent. As of now, this dip seems to be a correction within an uptrend as the technical indicators are still positive and the index is trading above its crucial supports. In the derivatives segment, FIIs started this series with short positions but as the index marched higher, they covered some of their shorts and added longs to reduce their net short positions. In the options segment, open interest addition is seen in 22500-22600 call options for the weekly series hinting at this zone to be a resistance. On the lower side, the immediate support for Nifty is now placed around the 22200 mark while positional support is around the 22000-21900 range. The index is expected to trade within this broad range but due to the negative market breadth, the broader markets could see some relative underperformance.