Market News

By Ashutosh Joshi

(Bloomberg) -- Before the trading day starts we bring you a digest of the key news and events that are likely to move markets. Today we look at:

• Small cap frenzy
• Gas stocks rally
• RBI’s dilemma

Good morning, this is Ashutosh Joshi, an equities reporter in Mumbai. Nifty futures point to a selloff, mirroring the bearish mood in Asia following steep declines in US equities overnight. Mid-and small-cap shares have held up so far, but the persistent weakness in frontline shares could damp interest in that segment of the market. SEBI has tightened rules for IPOs by micro companies, but that may not impact sentiment right away.  

F&O curbs drive liquidity to smaller stocks

After regulatory measures to curb options trading by retail investors, equity derivative turnover has continued to drop. On 10-day average basis, the notional turnover has shrunk to $2 trillion from almost $6 trillion earlier this year. Analysts at Yes Securities note that much of this liquidity is now chasing small-caps, which have shown greater resilience compared to mid-sized and large-cap peers. Although turnover in the equity cash market turnover is also off its peak, Yes Securities expects sustained investor interest in small and micro-cap stocks.

Rebound in gas stocks may not sustain

Shares of city-gas distribution companies have partially recovered from the selloff last month, which followed the government’s second cut in cheap gas allocations. But the recovery looks unsustainable, driven largely by hopes that the fuel will be brought under the GST ambit, says Nuvama. According to the broker, fundamentals remain weak, as potential benefits from GST implementation are uncertain, while the impact of reduced cheap gas allocations on profits is a given. Among city-gas distributors, Nuvama views Gujarat Gas as the least affected.

Rising dollar makes RBI’s FX strategy trickier

India’s central bank has begun cuttingcutting back on an offshore currency intervention strategy it deployed in recent months to tackle dollar strength. The RBI is said to have allowed expiry of some dollar short positions in the non-deliverable forwards market. The persistent dollar strength complicates the eventual unwinding of RBI’s NDF positions. The key question now is whether the central bank’s new leadership will adopt a less aggressive strategy to curb exchange rate volatility.

Analysts actions:

• Macrotech Rated New Buy at William O’Neil
• Vishal Mega Mart Rated New Hold at Asian Markets; PT 110 rupees
• Himadri Speciality Rated New Add at ICICI Securities

Three great reads from Bloomberg today:

• India’s record gold import said to be due to calculation error
• Powell signals Fed’s focus has returned firmly to inflation
• Big Take: Trump’s looming crackdown scares migrants

And, finally.. 

India’s IPO boom shows no signs of slowing, with over a dozen debuts planned in the final weeks of the year. These include Blackstone-backed diamond grader IGI’s $499 million share sale. Fueled by global and domestic liquidity, IPOs in India have already raised a record $19 billion in 2024, with at least $1 billion more in offerings expected to hit the market before the year is out.

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--With assistance from Kartik Goyal.