India's Small-Cap Stocks Set to Beat Larger Peers on Improved Earnings
Good morning, this is Chiranjivi Chakraborty, an equities reporter in Mumbai. Another volatile day awaits Indian stocks, with Israel-Iran tensions showing no signs of a let up. Nothing suggests either a breakdown or a breakout with the main gauges in a tighter coil than the broader market. The spotlight will be on BSE's shares after the exchange switched its derivatives expiry to Thursdays, which could impact its newfound heft in the futures and options market.
BSE bulls on the backfoot as expiry day battle ends
The short-lived expiry-day war between India's main bourses may be over, but not in BSE's favor. NSE has chosen Tuesdays for the expiry of its derivative contracts, prompting the BSE to reschedule its settlement day to Thursdays. This means BSE's expiry day will now follow that of NSE, reversing its previous lead. Goldman Sachs on Monday warned that BSE may face a 3 percentage point loss of market share and an 8% cut in EPS estimate if the bourse chooses Thursday to settle its contracts.
Mutual funds emerge as eager buyers in large deals
Local mutual funds are increasingly active participants in block trades of key consumer stocks, underscoring growing optimism about a revival in consumer sentiment in the coming months. SBI Mutual Fund, ICICI Prudential Fund, and HDFC Mutual Fund were among the biggest buyers in a $900 million block trade in Asian Paints and a $1.15 billion deal in Vishal Mega Mart. With the block deal market expected to heat up further, cash-flush mutual funds are set to absorb the increased supply with ease.
Profit margin recovery may sustain in June quarter
Corporate profit margins are expected to remain stable in the 18.2%-18.5% band during the June quarter, thanks to robust demand and easing input costs, including crude oil, coal, and steel, according to ratings firm ICRA. Declining interest rates may provide an additional boost to businesses. It expects some sectors such as electronics, semi-conductors, and niche segments within the automotive space, particularly electric vehicles, to witness an increase in investments.
Three great reads from Bloomberg today:
India's small-sized stocks are on track to beat their larger peers for a second straight month, with improved earnings prospects pointing to more gains this year. The NSE Nifty Smallcap 250 Index has advanced about 2% so far in June, outpacing a 0.4% gain in the benchmark Nifty 50 index. A 100-basis-point cut in borrowing costs this year, along with the RBI's cash-boosting measures, is fueling optimism that companies catering to domestic demand will benefit more as the economy grows.
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--With assistance from Kartik Goyal.
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