Sensex Opens Flat; Asian Paints & IndusInd Bank Top Losers

Tue, 12 Jan 09:30 am

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Asian share markets are trading on a mixed note today tracking a weak finish on Wall Street. The Nikkei is trading down by 0.1% and the Hang Seng is trading higher by 0.4%.

In US, Wall Street's indices slipped from record levels on Monday as investors locked in gains after a stellar vaccine and stimulus-fueled rally, while Twitter shares slumped following the permanent suspension of President Donald Trump's account.

The Dow Jones Industrial Average ended down by 0.54% while the Nasdaq ended lower by 1.22%.

Back home, Indian share markets have opened the day on a flat note.

Market participants are tracking Karnataka Bank share price and Tata Elxsi share price as these companies are scheduled to release their December quarter results today.

The BSE Sensex is trading down by 62 points. Meanwhile, the NSE Nifty is trading lower by 14 points.

Reliance and TCS are among the top gainers today. IndusInd Bank is among the top losers today.

Both, the BSE Mid Cap index and the BSE Small Cap index have opened up by 0.3%.

Sectoral indices are trading mixed with stocks in the energy sector and metal sector witnessing buying interest.

Banking stocks and finance stocks, on the other hand, are trading in red.

The rupee is trading at 73.40 against the US$.

Gold prices are trading down by 0.1% at Rs 49,335 per 10 grams.

Domestic gold and silver prices continued their volatile ride of this year amid mixed global cues. In the previous session, gold prices had risen 0.7% after a massive fall on Friday.

Speaking of the precious yellow metal, in his latest video for Fast Profits Daily, Vijay Bhambwani talks about why gold and silver prices crashed last week on Friday.

What does this event mean for the long-term trend in prices? Should traders change their bullish stance?

Vijay answers these questions in the below video. Tune in to find out more:

In news from the mutual funds space, in a partial relief to alternative investment funds (AIFs), the markets regulator has provided certain exemptions to such funds with regard to investment committee.

Under the new norms, members of an investment committee of an AIF will no longer be responsible for investment decisions.

Also, members of the committee would not be liable for compliance of the AIF investments with the regulatory provisions, governing documents of the AIF and other applicable laws.

However, exemption in AIF rule is conditional upon capital commitment of at least Rs 700 million from each investor accompanied by a suitable waiver.

In October, the regulator had amended AIF regulations that provided for shared responsibilities for the members of the investment committee (IC) with the investment manager.

The members of the IC of funds were also made liable for investment decisions and regulatory lapses in cases, where such committee was set up for approving investment decisions.

Prior to that, only fund manager was responsible and accountable for investment decisions.

In other news from the mutual funds space, a massive rally in the equity markets, bringing in heavy inflows into equity ETFs and open-ended debt funds has helped mutual fund AUM grow 17% to top the Rs 31-lakh-crore-mark in 2020, which is 1 percentage point lower than 2019, according to a report.

During the year, the mutual fund industry added Rs 4.5 lakh crore to the AUM, while in 2019 it grew 18% from Rs 22.86 lakh crore in 2018, when it had grown only 7.5%, as per Crisil data.

The industry not only recovered the losses in March due to a sharp erosion in the equity market and outflows from debt funds but also added Rs 4.5 lakh crore in the year to close at Rs 31.02 lakh crore.

However, according to the Association of Mutual Funds (Amfi), December saw the sixth straight month of outflows with investors exiting open-ended equity funds, with the large-cap, multi-cap and value/contra schemes bleeding the most.

On the other hand, dividend yield funds saw firm inflows to the tune of Rs 14.9 billion in the month.

Coincidentally, the month also saw the highest inflows for the category since Amfi changed its format in April 2019. Sectoral/thematic schemes got Rs 34.1 billion inflows, which is the highest for the category since April 2019.

At the aggregate level, open-ended equity schemes saw net outflows of Rs 101.5 billion in December, only slightly lower than the previous month's net outflows of Rs 129.2 billion.

Gold ETFs attracted net inflows of Rs 4.3 billion in December, reversing the net outflows of Rs 1.4 billion in November, as investors took advantage of the rising gold prices. For the full year, equity ETFs attracted inflows of over Rs 510 billion crore, while gold ETFs saw net inflows of over Rs 66 billion, taking their asset tally to Rs 2.56 lakh crore and Rs 140 billion, respectively.

Speaking of mutual funds, note that last year in September, the market regulator tweaked its October 2017 circular, mandating multi-cap funds to invest at least 25% each in smallcaps, midcaps and largecap stocks, leaving the remaining 25% to their discretion.

All mutual funds are required to comply with the latest provisions by the first week of February 2021.

Assuming every fund rebalances, the circular is expected to trigger a move of around Rs 280 billion from largecaps to smallcaps.

Richa Agarwal, lead smallcap analyst at Equitymaster, believes this move would be net positive for select smallcap stocks. As per Richa, there could be a speculative rally across smallcaps.

Here's what she wrote about it in one of the editions of the Profit Hunter:

• It would be myopic and imprudent to bet on any smallcap in the hope of a regulation driven rally.
  
  That said, you must invest in smallcaps selectively with long-term horizon in mind.
  
  Here's why...

• You see, despite the rally in smallcaps since March, there is still a huge valuation gap between smallcaps and Sensex.
  
  The ratio of smallcaps to Sensex stands at 0.37 now, as compared to long-term average of 0.44 times.
  
  This means certain smallcaps will witness a significant rebound, irrespective of regulations.

Richa believes this could be a once in a decade opportunity to get rich from select smallcaps.

Moving on to stock specific news...

GAIL (India) is among the top buzzing stocks today.

GAIL (India), the nation's largest gas distribution firm, will on Friday consider buyback of shares with a view to returning surplus cash to shareholders.

In a stock exchange filing, the company said its board will meet on January 15 to consider share buyback as also payment of interim dividend for the fiscal year ending March 2021.

The government, which holds 52.1% of GAIL, is likely to participate in the buyback just as it did in the case of NTPC, Engineers India, RITES and KIOCL.

The government has asked at least eight state-run companies to consider share buybacks as it scours for ways of raising funds to rein in its fiscal deficit.

The firms asked to consider share buybacks include Coal India, NTPC and NMDC.

Finance Minister Nirmala Sitharaman had in her budget for 2020-21 set a target of raising Rs 2.1 lakh crore from privatisations and sale of minority stakes in state-owned companies.

According to the Department of Investment and Public Asset Management (DIPAM), the government has so far raised Rs 282.98 billion from disinvestment proceeds.

While privatisation of Bharat Petroleum Corporation (BPCL) and Air India has been pushed into next fiscal due to Covid-19-related delays, tax collections have been hit hard as restrictions imposed to curb coronavirus dented incomes all around.

We will keep you updated on the latest developments from this space. Stay tuned.

And to know what's moving the Indian stock markets today, check out the most recent share market updates here.

For information on how to pick stocks that have the potential to deliver big returns, download our special report now!

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