The main grouse against Sebi's reclassification of market-caps for mutual funds was that it stymied domestic mutual fund managers' stock- picking abilities, leading to portfolio concentration, which caused even active funds to behave like passive funds. Now as Sebi takes a relook at this classification, expectations are that it would increase fund managers' wiggle room to buy stocks that are offering good value. Since these stocks lie among midcaps and smallcaps, such a move may draw money to second-rung stocks.
STREET PULSE: Where we stand Nifty futures on the Singapore Exchange traded 12 points down at 7 am (IST), indicating a weak start ahead for Dalal Street. Elsewhere in Asia, stocks fell while safe-haven gold rose as the death toll from a coronavirus outbreak surpassed the SARS epidemic, raising alarm bells about its severity.
HERE'S WHAT TO WATCH  | MSCI's broadest index of Asia-Pacific shares outside Japan stumbled 0.7% to be on track for its second straight day of loss. Japan's Nikkei fell 0.8% while South Korea's KOSPI was off 1.4% and Australian shares eased 0.5% . |
| Stocks fell on Wall Street on Friday causing the Dow to fall 0.9%, while S&P500 declined 0.5% and the Nasdaq 0.5%. |
| Oil prices extended their decline from an early January peak above $70 as the spectre of excess supplies loomed over the market after the spreading coronavirus outbreak hit demand in China, the world's largest oil importer. Brent hit a low of $53.63 a barrel and was down 38 centsat $54.09 while WTI fell 38 cents to $49.94 |
| The rupee declined by 22 paise to settle at 71.40 against the US dollar on Friday amid selling in domestic equities and strengthening of the American currency overseas. |
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Bank Merger Set to Kick Off… The government is likely to notify the merger of 10 public sector banks to create four big lenders later this week, as they have completed the groundwork for the same, two people familiar with the development said. After it is notified, the respective bank boards will meet to give their customary final approval and fix the all-important swap ratio for the mergers. Each bank had its own valuers and harmonisation of valuation for the merging partners has also been done.
Read More Taxmen Bullish 12% Growth Target… A 12% growth in tax collections next fiscal may look ambitious to some but for Revenue Secretary Ajay Bhushan Pandey it is achievable in an economy that is projected to clock a 10% nominal GDP growth. The economy slowing down to its slowest growth in 11 years together with a cut in corporate tax rates led to the government missing its tax collection target by a wide margin in the current fiscal. The tax shortfall also led to slipping on fiscal deficit target for the third year in a row. Pandey told PTI he was confident of meeting the tax collection target of Rs 24.23 lakh crore for 2020-21.
Read More India, China Seek Simpler Tariffs… India and China have asked developed countries, including EU nations and the US, to simplify their tariff structures for agricultural goods and adopt a more transparent, value-based levy. Most developing countries including India use ad-valorem duties or tariffs expressed as a fixed percentage of the value of the imported product. The US had 820 distinct duties for agricultural goods in 2018, Japan 352 and Canada had 473 such bound tariffs compared to India’s 19 and China’s 40.
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Smallcap Challenge… Picking the right smallcap mutual fund scheme has become a challenge for investors. In the past one year, there have been stark contrasts in the performances of schemes within the smallcap category. The best performer in the space, Axis Smallcap Fund, returned 37.37% in a year, while HDFC Smallcap, which shed 1% in value, has been a notable laggard. Analysts said this polarisation in returns is the highest they have seen in the last 20 years. Data from Value Research showed that the average returns from the smallcap fund category have been 12.34% in the past one year. The S&P BSE Smallcap Index has moved up by 10.3%.
Read More Retro Tax Returns to Haunt FPIs… The Budget proposal to apply indirect transfer provisions to even Category II foreign portfolio investors could lead to the imposition of retrospective tax on certain transactions, said experts. The government had restricted the exemption from indirect transfer taxes to Category I FPIs in the budget. Previously, even Category II FPIs had enjoyed the exemptions. While making changes to the law, the government grandfathered or exempted only those transactions made by such FPIs till September 23, 2019, from the ambit of the new law. Effectively, even the investments made by Category II FPIs since September 24 will come under the ambit of the new law.
Read More Bad Loan Cloud over Banks… Indian banks, which reported healthy growth numbers in recent quarters, continue to be plagued by high slippages, especially from the corporate loan book. Top banks, including State Bank of India, Axis Bank, Bank of Baroda, Punjab National Bank and Bank of India all reported a sharp rise in slippages in the December quarter, signalling that trouble is still brewing on the asset quality front. SBI saw its slippages almost double sequentially to Rs 16,525 crore. Axis Bank recognised slippages of Rs 6,214 crore. Kotak Mahindra Bank put new additions in bad loans at Rs 1,062 crore in the third quarter.
Read More Meanwhile... Decriminalise Business Laws... India Inc has sought urgent steps to de-criminalise provisions in as many as 37 laws that impact businesses, including the Partnership Act and Insolvency and Bankruptcy Code, to boost investor confidence and ensure ease of doing business. The CII has submitted a 12-point plan to Prime Minister Narendra Modi and Finance Minister Nirmala Sitharaman, which includes introduction of a one-time settlement scheme and compounding provision. The recommendations cover 37 laws and Acts ranging from the Partnership Act of 1932 to the Insolvency and Bankruptcy Code of 2016, which it said includes offences that are technical or those that do not affect public interest prejudicially.
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