Sebi's market-cap rules of 2017 are stiff: top 100 companies clubbed as largecaps, 101st to 250th as midcaps and 251st onwards smallcaps. A largecap fund has to invest 80% of the portfolio in largecaps, while a midcap or smallcap fund must to put in a minimum of 65% of the corpus in stocks from those categories. The idea is the ensure uniformity, so that investors could make accurate comparison of schemes. The result: concentration of portfolios, and under-performance, in a market where new economy sectors grew in strength, throwing up opportunities for investors who could catch them young. Mutual funds were left behind in this race. Which is why the Sebi move to take a relook at those rules bodes well for fund managers and investors both.
MARKET CUES: Where do we stand >>>  | Nifty futures on the Singapore Exchange traded 13 points higher at 7 am (IST) this morning, signaling a flat start ahead for Dalal Street. |
| On Monday, Nifty technical indicator RSI turned lower from the overbought territory, with followup action on the daily scale, while weekly RSI was set for a negative crossover, which don't bode well for the bulls from a short-term point of view. |
| Asian stocks opened higher Tuesday after a technology-fueled rally in the US amid positive economic data and the potential for further stimulus. Shares rose in Japan, South Korea and Australia. |
| The Nasdaq surged to a record high close on Monday as a rebound in multibillion-dollar deals and efforts to hammer out a coronavirus relief bill resumed. Dow rose 0.89%, while the S&P500 gained 0.72% to end at 3,294. |
| The rupee declined by 20 paise, or 0.26 per cent, to close at 75.01 against the US dollar on Monday. |
| A nascent rebound in the dollar paused on Tuesday, as investors weighed mixed but encouraging economic data against slow progress toward a US government's spending package. The yen recovered some overnight losses, as did the Australian dollar. The sterling recouped overnight losses while elevated Sino-US tensions kept the yuan on the weaker side. |
| Oil prices fell on concerns over fuel demand growth. WTI crude futures fell 22 cents, or 0.5 per cent to $40.79 a barrel, while Brent futures fell 27 cents, or 0.6 per cent to $43.88. |
| Gold prices jumped to Rs 53,650 per 10 gm on Tuesday, while silver fell to Rs 65,400 a kg. On MCX, August gold futures fell 0.41 per cent to Rs 54,050 on Monday, while silver September futures traded at Rs 65,790. In international markets, spot gold fell 0.3% to $1,969.74 per ounce on Monday retreating from a record high after the dollar strengthened and investors booked some profits. |
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RIL-Biyani deal at last hurdle… Negotiations over resolving the personal debt of Kishore Biyani, amounting to about Rs 2,000 crore, is one of the final items as the deal between RIL and Future Group reaches its final leg. The enterprise value of the retail assets expected to be acquired by RIL stands at around $3 billion, or Rs 22,700 crore, including the debt to be assumed, sources said. The RIL is also likely to acquire up to a 10-15% minority stake in the group's FMCG business Future Consumer.
Read More India Inc continues to borrow overseas… Indian companies continued to borrow overseas after the Covid-19 outbreak, taking advantage of cheaper finance, while lending by local banks shrank, prompting some economists to call for interest rates to be lowered further to help revive local demand. Companies raised $3.5 billion (Rs 26,320 crore) in external commercial borrowings in April-June, as per RBI data. This amount was equivalent to almost 30% of ECBs taken in the year-ago period.
Read More SBI study shows strong case for lifting moratorium… A study by SBI shows healthy companies are availing of the moratorium facility to conserve cash amid the current uncertainty and thus there is a strong case for ending the EMI holiday on loans. An analysis on over 300 companies having a total debt of Rs 4 lakh crore shows at least 40 per cent of the loans under moratorium are in sectors having a comfortable debt-equity ratio. The companies in the sample span sectors pharma, FMCG, chemicals, healthcare, consumer durables and automotive.
Read More Gold traders stop selling on credit… Traders at Mumbai's Zaveri Bazaar, reeling under sales depleted by the Covid-19 pandemic and rising gold prices, have stopped selling jewellery against credit to the retail jewellers. They are insisting that retailers pay upfront for their jewellery taken during the pre-Covid period or return them if they fail to pay. Retailers have already returned a lot of gold jewellery to the manufacturers, who are melting these into bars and selling in the market. They are using this money to reduce the interest cost on bank borrowing. In the process, import of gold is also coming down.
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Mauritius regulatory vigil haunts NRIs… Several Mauritius-based funds managed by NRIs are a worried lot as heightened scrutiny of such investment vehicles by the island nation's securities regulator has raised concerns whether they would be able to comply with the new overseas investors norms in India before the year-end deadline. Lawyers and consultants handling the compliance matters of these investors said the market regulator of Mauritius has been slow in giving permissions to several NRI-controlled funds that are investing in India through the African country.
Read More India factory output contracts faster… India's manufacturing activity contracted at a faster pace in July after showing some recovery in June, as localised lockdowns by state governments took their toll on business activity. The IHS Markit India Manufacturing PMI dropped to 46 in July from 47.2 in June, pointing to a "marked deterioration in business conditions across the Indian manufacturing sector", to which firms responded by cutting both staff numbers and purchasing activity, IHS Markit said in its report. A reading below 50 is an indicator of contraction, while one above that shows expansion.
Read More Banks may drag Sintex, some NBFCs to IBC… Lenders are set to initiate insolvency proceedings against Sintex Industries. They will also initiate the proceedings against NBFCs Religare Finvest, Reliance Home Finance and Reliance Commercial, and will seek permission from RBI for the same. The move to initiate insolvency proceedings follows the expiry of the six-month deadline for resolving the default in respect of these companies.
Read More Global manufacturers seek single-window clearance… Global manufacturers such as Foxconn, Samsung, Wistron and Yazaki have raised concerns over the process of getting permission for industrial projects in India, involving multiple clearances and long response times, underscoring the need for an effective single-window system to attract big investments. Companies raised these concerns at discussions with officials of the Department for Promotion of Industry and Internal Trade (DPIIT) on the proposed single-window clearance mechanism for investments that the government has announced.
Read More Meanwhile... Stock split leads to underperformance?… History data in India shows majority of the stocks have underperformed after stock splits. In a stock split, existing shares are divided, which results in lower prices. Companies announce stock split to make a share numerically appealing to retail investors, who generally like shares of lower denomination. Out of the top 20 companies by market-cap that have split the stock in last 25 years, 17 have underperformed in three years post-split compared with their three-year performance pre-split.
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