Rajesh Palviya of Axis Securities highlights a continued bullish momentum for midcap and smallcap stocks, anticipating a potential further rally of 3-4%. This positive outlook is supported by chart breakouts and robust investor interest, particularly as benchmark indices like the Nifty are undergoing consolidation.

The Nifty index has been consolidating within a range of 24,600 to 25,000 for the past two weeks, recently reaching the upper end of this range. According to Palviya, call writers at the 25,000 and 25,100 strike levels may present immediate resistance. However, the broader market recovery, with participation from banking, financial, real estate, and capital goods sectors, suggests a possible breakout above 25,100. Such a breakout could trigger short covering, potentially extending the Nifty's rally towards 25,400 to 25,500 in the coming week. The recommended strategy is to buy on dips, with a stop loss at 24,850.

Bank Nifty, on the other hand, is displaying a clear breakout and is charting a new all-time high trajectory. Significant short covering, especially after the RBI policy, is expected to fuel another rally in the upcoming week, with a projected target of 57,000. Similar to Nifty, a buy-on-dips strategy is advised, with a stop loss around 56,200.

Palviya notes that midcap and smallcap stocks are currently outperforming largecaps. This trend is typical when benchmark indexes consolidate, leading investor focus to shift towards these segments. The strong performance observed in the midcap and smallcap space over the last two to three weeks indicates significant buying interest.

Looking ahead, Palviya expects this outperformance to persist, with another rally of 3% to 4% likely in the midcap and smallcap space in the coming week. He advises investors to remain invested in quality midcap and smallcap stocks. Breakouts on near-term and short-term charts affirm the strong buying interest. Maintaining the Nifty above the 24,800 stop loss level could further support a 2% to 3% up move in these segments.

Based on this market setup, Rajesh Palviya offers two stock recommendations:

1. Oberoi Realty: This real estate stock has broken out of an 8- to 10-week consolidation range and is forming a rounding bottom pattern on its daily chart. Derivative data indicates long built-up. Palviya believes Oberoi Realty could extend its gains, with a possible target of 1950 to 1960 in the coming week. A stop loss at 1888 is recommended for buying.

2. Fortis Healthcare: This healthcare stock is trading near its all-time high and moving in an up-sloping channel on its weekly chart, indicating sustained buying action. Following a breakout on the daily chart, Fortis Healthcare is expected to extend its gains with a possible target of 795 in the coming week. The recommended stop loss for this stock is 748.