Investors' preference for largecap stocks has caused a chasm, the widest in two decades, between market capitalisations of the largecaps and the second-rung stocks. While Sensex is sitting on a new top, midcap and smallcap indices trade 20-30% below their highs. This divergence suggests in case of mean reversion, there is a possibility of fund rotation in favour of midcaps and smallcaps. The jury, however, is still out on this.
STREET PULSE: Where we stand Nifty futures on Singapore Exchange traded some 19 points lower at 7 am (IST), signalling weakness ahead on Dalal Street. Elsewhere in Asia, shares edged higher on Thursday amid growing confidence in the global outlook following improving economic indicators and a preliminary trade deal between the US and China.
HERE'S WHAT TO WATCH  | MSCI index for Asia-Pacific shares outside Japan rose 0.08%. Australian shares were up 0.07%, while Japan's Nikkei stock index slid 0.12%. |
| Wall Street paused record-setting rally in overnight trade as investors' optimism about global economic growth was countered by a steep drop in FedEx Corp shares. The Dow fell 27.88 points to 28,239, the S&P500 lost 1.38 points to 3,191, and the Nasdaq added 4.38 points to 8,827. |
| US crude oil prices dipped 0.08% to $60.88 a barrel in Asia after US government data showed a decline in crude inventories. However, the prices are likely to be supported due to production cuts coming from the Opec and its allies, including Russia. |
| The rupee rebounded from early lows to close marginally up at 70.97 against the US dollar on Wednesday helped by a record-breaking run in equity markets and weak oil prices. |
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Single Rate GST on Lotteries… The GST Council on Wednesday departed from its practice of consensus-based decision-making, opting the first time for a vote to settle differences among states over the taxation of lotteries. The council decided to impose a single rate of 28% on state-run and authorised lottery but refrained from any generalised rate increase or removal of exemptions.
Read More NRIs Bonding with ETF… Many NRIs are lapping up Bharat Bond ETF as restrictions on investing in various other debt products for them have left fewer options other than fixed deposits. Analysts said safety of the instrument, low cost and better returns than debt products back home are prompting NRIs to try out the product. The ETF — the first such product in the country — will invest only in AAA-rated bonds of PSUs.
Read More Demand Revival Forecast… Top consumer goods firms including Hindustan Unilever, ITC, Nestle, Britannia and Parle expect Indian consumer demand to recover by the middle of next year, helped by government interventions and improved sentiments in rural areas. Consumer product sales have been tapering off consistently over the past four quarters, and experts said the low base will also help sales revival.
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Trump Impeached… The US House of Representatives impeached President Donald Trump on charges of abuse of power and obstructing Congress, the culmination of an effort by Democrats that further inflamed partisan tensions in Washington and deepened the nation's ideological divide. The historic votes on Wednesday evening, which won the support of almost all Democrats in the House chamber but not a single Republican, leave Trump as only the third president in US history to be impeached -- and the only impeached president likely to win his party's nomination for re-election. The House action sets the stage for a trial next month in the Republican-controlled Senate, which is a friendlier terrain for Trump.
Read More Tata Setback… India's quasi-judicial appeals body dealing with corporate law cases on Wednesday reinstated Cyrus Mistry as the executive chairman of Tata Sons, the holding company of the Tata Group, three years after he was sacked due to 'non-performance'. NCLAT termed Mistry's removal in October 2016 by Tata Sons as 'illegal' and made him chairman again. It also set aside Tata Sons' decision to convert itself into a private company. People close to Mistry said he was likely to dig in his heels and continue his fight against the old order at Tata Sons.
Read More Higher Deficit Plea… Faced with slowing revenue, states have pitched strongly for a relaxation in the fiscal deficit limit to 4% of GDP. Sitharaman had pegged the Centre's fiscal deficit target at 3.3% of GDP for FY20 in the budget presented in July, compared with 3.4% in FY19. At a customary pre-Budget meeting with finance minister Nirmala Sitharaman on Wednesday, the states also sought the release of GST compensation for October and November, besides higher funds under their budgets for infrastructure development.
Read More Meanwhile... A new RBI move has banks unsettled. They have voiced concerns over the central bank's decision to introduce round-the-clock fund transfers, cautioning the regulator that it could cause chaos. Several senior bankers said that lenders may run into a problem in managing cash balances if there is a large outflow late in the evening or early morning, when the money market is shut. But others said the fears could be exaggerated.
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