Are Small and Mid Cap Stocks Getting Too Hot? SEBI Steps In to Cool Things Down | Weekly Update March 3rd
Hello Readers!
Have you been glued to the market news lately, watching small and mid-caps surge? You’re not alone! These smaller companies have been on a hot streak, leaving many investors wondering if it’s time to jump in. But with big returns often comes big risk, and regulators are starting to take notice. And, we’ll dive into all you need to know in just a bit. So, hold on to your horses, because first we need to look at how the extra trading day affected the market’s weekly performance!
🧾In this Article
- Weekly Market Wrap-up
- Key results this week
- Quick bites
- Stocks in News
- Sustainability Corner
- IPO news
Cover story: Are Small and Mid Cap Stocks Getting Too Hot? SEBI Steps In to Cool Things Down
📈 Weekly Update
This week on the Indian markets, it was a tale of two cities. While the broader indices painted a positive picture, some sectors experienced contrasting fortunes. The benchmark SENSEX closed higher by 0.82%, reaching 73,745.35, while the NIFTY gained a more modest 0.57%, settling at 22,338.75. The banking sector emerged as the clear winner, with the BANKNIFTY index surging 1.02% to 47,286.9.
Winners & Losers: Larsen & Toubro emerged as the champion, soaring a mighty 7.22%. Tata Motors wasn’t far behind, cruising in with a 4.27% gain. Joining the party were Tata Consumer, Tata Steel, and IndusInd Bank, all with impressive climbs of over 3%.
But not everyone was having a good time. Apollo Hospitals took a brutal tumble, dropping over 10%. Asian Paints also felt the sting, falling more than 5%. LTI Mindtree, Bajaj Auto, and Divi’s Lab weren’t feeling the love either, each closing the week down by more than 4%.
Sector Spotlight: Leading the gainers was the BSE CG index, surging an impressive 3.72% to close at 58,842.59. The BSE CD and BANKEX indices also fared well, climbing 1.8% and 1.05% respectively, settling at 52,360.97 and 53,755.26. Modest gains were also observed in the AUTO and METAL sectors, both rising by around 0.8% and 1.8% respectively.
However, the picture wasn’t entirely rosy. The BSE IT index emerged as the biggest loser, dropping 1.1% to close at 38,201.59. The FMCG and Healthcare sectors also experienced minor setbacks, falling by 0.39% and 2.94% respectively. Additionally, the TECK and BSEPSU indices witnessed slight declines of 0.95% and 0.08% respectively.
Also, oil prices continued their upward trend during this week, with Brent futures exceeding $82 per barrel and showing a weekly gain of 0.8%. This rise comes as OPEC+ prepares to decide on extending production cuts in the coming quarter.
In individual stock news, MOIL Ltd. saw a 6% increase in its share price after raising prices for manganese ore. Castrol India’s stock also continued its impressive performance, gaining 40% in the past three months.
Looking ahead, a report predicts that India will experience the highest growth in the number of ultra-high net worth individuals (UHNWIs) by 2028, driven by its strong GDP growth. This trend is expected to be mirrored across Asia, with a projected 38.3% rise in the ultra-rich population.
Global Gossip: Global markets were positive this week, with the Japanese Nikkei index reaching a new all-time high near 40,000 points after a two-day slump. Other Asian markets like China, Hong Kong, and Australia also saw gains. This optimism followed the Federal Reserve’s inflation report, which came in line with expectations.
In the US, S&P 500 futures finished the week slightly higher, inching up 0.1% by the close of trading in Tokyo. Meanwhile, Japan enjoyed a winning week with the Nikkei 225 futures soaring 1.8% and the broader Topix index rising 1.2%.
Across the rest of Asia, the outlook was more varied. Hong Kong’s Hang Seng index managed a modest gain of 0.1%, while the Shanghai Composite closed the week nearly flat.
Finally, Europe appeared optimistic, with Euro Stoxx 50 futures ending the week 0.5% higher, hinting at a slightly positive opening for the region.
Rupee Report: Boasting a narrower trade gap and robust reserves, the Rupee reigns supreme as Asia’s best currency in 2024. Year-to-date, it has appreciated 0.48%, surpassing the U.S. Dollar Index’s 1.91% rise (as per Bloomberg). However, despite this year-long strength, the Rupee closed flat against the dollar on Friday (₹82.91) following positive Indian economic data. This highlights the currency’s overall resilience, even in the face of short-term fluctuations.
Bitcoin developments: In other currency news, Bitcoin prices surged this week, shattering the $60,000 mark in a stunning two-year high. The cryptocurrency’s 40% increase throughout 2024 has been relentless, with current prices hovering around $61,000. Strong demand from exchange-traded funds, particularly BlackRock Inc.’s iShares Bitcoin Trust, which pulled in a record-breaking $612 million inflow on Wednesday, is a major driving force behind the surge.
Bottom Line: Indian stocks got off to a flying start this week, following the lead of a positive global mood and some good news from the domestic front. Turns out, the key inflation data in the US wasn’t as scary as everyone thought, calming investor nerves about potential interest rate hikes. This helped push the markets firmly into the green.
Heads up though, the markets will be open this Saturday for a special reason. It’s part of a practice run, like a fire drill for the stock exchanges and depositories, to make sure everything runs smoothly in case of any unexpected hiccups. So, expect a slightly different trading day on Saturday, but otherwise, it’s business as usual!
🍟 Quick Bites
- 🌟 India will add 18 more nuclear power reactors by 2032: Nuclear Power Corporation.
- 💰 Cult Fit has raised ₹84.5 cr in a round led by existing investor Valecha Investments.
- 🌾 Import of yellow peas is now allowed in India. Parties need to register under the import monitoring system.
- 💥 Adani Defence has launched South Asia’s largest facilities for ammunition and missiles.
- 🚀 PM Modi revealed the names of 4 astronauts for India’s first human space mission, Gaganyaan.
- 📡 Spectrum auction will be conducted in the next 2-3 months: Secretary of DoT.
- 💼 Indian companies are expected to give an average 10% salary hike this year, with auto, manufacturing, and engineering sectors giving the highest hikes. In 2023, the average hike was 9.5%: Mercer’s survey.
- 📉 Foreign portfolio investors’ aggregate holding in Indian stocks fell to a 10-year low in Jan 2024: ICICI Securities.
- 🚙 Share of SUVs in the total passenger vehicle (PV) sales in India is expected to increase from 51% in the financial year 2022-23 to 62% in the financial year ending March 2025: CRISIL.
- 🏭 Import of coal in India for blending purposes fell 36.69% to 19.36 million tonnes in the April-Jan period of the current financial year.
- 💎 India is expected to witness the highest growth in the number of ultra-high-net-worth individuals ($30 million+) in the world by 2028: Knight Frank report.
- ⛏️ The Indian government will launch the 2nd round of critical mineral mine auctions on 29 Feb.
- 📺 Reliance and Disney are joining forces to establish an ₹70,352 crore joint venture (JV) for their media businesses based in India.
- 📈 India experienced a GDP growth of 8.4% in the October-December 2023 period, marking the fastest growth in six quarters, surpassing forecasts of approximately 6.6%.
- 🛣️ The growth rate of eight key infrastructure sectors in India decelerated to a 15-month low of 3.6% in January.
- 🚗 NHAI has extended the deadline for compliance with the ‘One Vehicle, One FASTag’ initiative to the end of March.
- 🌱 According to the Ministry of Agriculture and Farmer’s Welfare, ₹3 lakh crore has been disbursed to farmers under India’s PM KISAN scheme thus far.
- 💰 The Union Mines Ministry has initiated an auction for 18 critical and strategic mineral blocks, with resources valued at around ₹30 lakh crore.
- 🚨 Starting from June 1, 2024, 25% of specific airport personnel will be required to undergo a daily breath analyzer test, as per DGCA regulations.
- 🔌 Skoda Auto is gearing up to enter India’s electric vehicle segment.
📰 Stocks in News
- 🏦 Canara Bank has approved a 5-for-1 share split.
- 🏗️ PNC Infratech secures a ₹699 crore order for flyover construction in Gwalior.
- 🤝 Wipro teams up with Nokia to offer private wireless solutions.
- 🏦 SBI faces a ₹2 crore fine from RBI for regulatory non-compliance.
- 💡 SVJN seals a deal with J&K Power Corp for the supply of 300 MW power.
- 💊 USFDA recalls pharma products from Sun Pharma, Lupin, and Alkem Labs in the US market.
- 📶 Ericsson deploys 100,000 MIMO 5G radios for Bharti Airtel in 12 service areas.
- 💼 Vodafone-Idea (Vi) receives board approval to raise ₹20,000 crore.
- ⌚ Titan to acquire the remaining 0.36% stake in CaratLane.
- 🏦 Bandhan Bank finalizes the acquisition of Aegon Life Insurance.
- 🏢 Happiest Minds unveils a new organizational structure.
- 💰 Zydus Lifesciences’ ₹600 crore buyback opens on 29 Feb.
- 🔌 Mahanagar Gas acquires a 31% shareholding in 3EV Industries for ₹96 crore.
- 🏭 DCM Shriram plans a ₹1,000 crore investment over the next 5 years for a new epoxy resin factory.
- 🎖️ Airtel founder Sunil Mittal receives a Knighthood from UK’s King Charles.
- 📉 Reliance Capital to be delisted from the stock markets.
- ⛏️ Coal India partners with BHEL to establish an ammonium nitrate factory.
- ✈️ SpiceJet resolves its ₹250 crore dispute with Celestial Aviation.
- 🔥 NTPC achieves over 100 million tonne (MT) coal production from its captive mines.
- 📺 Dish TV calls an extraordinary general meeting (EGM) on 21 March for shareholder approval of 3 director appointments.
- 🛍️ Reliance Industries’ Reliance Consumer Products collaborates with Sri Lanka-based Elephant House for beverage manufacturing, marketing, distribution, and retail under the Elephant House brand in India.
- 🔬 Aurobindo Pharma’s injectable facility in Telangana receives 7 observations from USFDA.
- 🏢 Biocon Campus (Site 1) facility receives 4 observations from USFDA for Biocon Biologics.
- ❌ Sony Pictures withdraws merger proposal with ZEE, previously submitted to the NCLT.
- 📈 Jio Financial Services set to join the Nifty Next 50 index on 28 March.
- 💼 SoftBank Group reduces its ownership to 2.83% by selling a 2% share of its stake in Paytm’s parent company, One 97.
🌱 Sustainability Corner
- 🍏 Apple abruptly axed its decade-long electric car project, “Project Titan,” surprising nearly 2,000 employees. COO Jeff Williams and Kevin Lynch announced the shift, reassigning many to the AI division. This move impacts the EV market, potentially benefiting established automakers like Tesla, but also raises questions about the future of autonomous driving technology and its potential disruption to the industry.
- India’s green bond market is a mere 3.8% of the corporate bond market, despite a recent ₹16,000 crore push from the RBI.
🚀 IPO Corner
🏨 Juniper Hotels
- Shares of Juniper Hotels, which operates hotels under the Hyatt brand, jumped over 11% on their debut day in the stock market.
📊 RK Swamy
- RK Swamy, a Chennai-based marketing communications company, has set the price band for its IPO at ₹270-₹288 per share.
- This makes them the first company in their category to go public in India.
- The IPO will be open for public subscription from March 4th to March 6th, with bidding for anchor investors opening on March 1st.
- The ₹742.35 crore IPO comprises a fresh issue of shares worth up to ₹173 crore and an offer for sale by existing shareholders.
💼 Platinum Industries
- The IPO of Platinum Industries received overwhelming response, getting subscribed 22.19 times on its second day.
- The ₹2235 crore IPO received bids for over 213 million shares against the 9.63 million shares offered.
- The portion for non-institutional investors was subscribed over 42 times, while the retail individual investor portion received 25.5 times subscription.
- The qualified institutional buyer category received 90% subscription.
🔌 Exicom Tele-Systems
- The IPO of EV charger maker Exicom Tele-Systems witnessed strong demand, getting subscribed 27.76 times on the second day.
- The ₹429 crore IPO received bids for over 505 million shares against the 18.22 million shares offered.
- The retail individual investor portion was subscribed to over 64 times, while the non-institutional investor portion received healthy demand as well.
Are Small and Mid-Cap Stocks Getting Too Hot? SEBI Steps in to Cool Things Down
Have you been hearing a lot about small and mid-cap stocks lately? They’ve been on a tear, delivering impressive returns for investors. But with great returns, come great risks, and regulators are starting to take notice.
In this blog post, we’ll break down the recent developments surrounding small and mid-cap mutual funds in India, and what it means for you as an investor.
Small and Mid-Caps on Fire, But Concerns Arise
Here are some key facts to understand the situation.In 2023, a whopping 40% of new money entering actively managed equity funds went into small and mid-cap schemes. That’s a significant chunk of change!
These impressive inflows have caught the attention of the Securities and Exchange Board of India (SEBI), the market regulator in India. They’re concerned about the potential risks associated with such rapid growth.
One concern is liquidity. Small and mid-cap stocks are generally less traded than larger companies. If a lot of investors suddenly want to sell their small and mid-cap holdings, it could be difficult to find buyers, potentially leading to losses.
SEBI Takes Action: What to Expect
SEBI is taking steps to address these concerns. Here’s what those steps look like.
- Stress testing: They’re requiring mutual funds to conduct stress tests to see how their small and mid-cap funds would handle a market downturn. This will help assess potential risks.
- Disclosure: Funds will need to disclose the results of these stress tests to investors, along with details like the time it would take to sell off a portion of the portfolio. This increased transparency will help you make informed investment decisions.
- Curbing inflows: SEBI is encouraging fund houses to moderate inflows into small and mid-cap funds through various measures. This could include reducing distributor commissions, or even implementing exit loads or swing pricing in extreme cases.
What Does This Mean for You?
While SEBI’s actions aim to protect investors, it’s important to remember that investing in small and mid-cap stocks inherently carries more risk than larger companies. Here are some takeaways for you.
- Do your research: Don’t just jump on the bandwagon because small and mid-caps are hot. Understand the company, the industry, and the associated risks before investing.
- Invest for the long term: Small and mid-caps can be volatile, so be prepared to hold your investments for the long haul to ride out market fluctuations.
- Diversify your portfolio: Don’t put all your eggs in one basket. Spread your investments across different asset classes and company sizes to manage risk.
Stay informed: Keep an eye on developments in the market and any further actions taken by SEBI. This will help you make informed decisions about your investments.
Remember, investing is a personal journey. By understanding the risks and taking a thoughtful approach, you can make informed decisions and navigate the ever-changing market landscape.
Stock recommendation
Godrej Properties (GODREJPROP)
Recommendation: Buy
Target Price: ₹2500-₹2550
Stop Loss: ₹2399
Investment Horizon: 1-2 weeks
Rationale:
- Strong technical momentum: Godrej Properties’ stock price has formed a higher high on the weekly charts, indicating bullish momentum.
- Trading above key averages: The stock is currently trading above all its major moving averages, which is a sign of strength.
- Positive volume: Good delivery volume on Friday, which suggests that there is strong institutional buying interest in the stock.
Upcoming key financial events for the week:
| Date | Event |
| 01-Mar-24 | – USD Revised UoM Consumer Sentiment |
| – USD ISM Manufacturing PMI | |
| – INR FX Reserves, USD | |
| 05-Mar-24 | – USD ISM Services PMI |
| 06-Feb-24 | – USD ADP Non-Farm Employment Change |
| – USD Fed Chair Powell Testifies | |
| 07-Mar-24 | – USD Unemployment Claims |
| – EUR Main Refinancing Rate | |
| – EUR Monetary Policy Statement | |
| – USD Fed Chair Powell Testifies | |
| 08-Mar-24 | – USD Average Hourly Earnings m/m |
| – USD Non-Farm Payrolls | |
| – USD Unemployment Rate | |
| – INR FX Reserves, USD | |
| – INR Bank Loan Growth/Deposit Growth |
