After Smallcaps, India’s Bears Close in on Midcaps

(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:

Good morning, this is Ashutosh Joshi, an equities reporter in Mumbai. Indian stocks will likely remain under the weather thanks to President Trump’s renewed tariff threats. The Nifty 50 index is already set to cap its fifth straight month of losses, the worst losing run in almost three decades, while a gauge of mid-cap stocks is flirting with a bear market. All in all, the wait-and-watch scenario for local stocks continues, with investors hoping for a reversal of fortunes in the coming months.

Change of leadership at SEBI 

India’s capital markets regulator has got a new leader just as a deepening foreign exodus has sent share prices tumbling. The number one demand from investors: fewer regulatory hoops to jump through. SEBI has of late taken several steps to ease the compliance burden, but policy flip-flops on alternative funds, disclosures by foreign funds and curbs on derivatives trading are a sore point with some stakeholders. Market players are hoping that the new head will try to keep things simple.

Smallcaps lose appeal as financial performance lags

Despite their much-touted appeal as the big beneficiaries of India’s economic growth, small-cap companies are yet to live up to investor expectations as far as operating performance goes. For the latest quarter, profits of small-cap companies in the BSE 500 gauge fell 13% from a year ago, while those for large and mid-sized firms grew more than 5%, according to Kotak Institutional Equities. This could hold back many investors from rushing to buy small-cap shares even if they appear optically cheaper after the plunge from their record highs.

Big ambitions for small-ticket mutual fund offerings 

Some of India’s top asset management companies have already lined up plans to roll out small-ticket offerings that allow investors to put as low as 250 rupees into mutual funds every month. The move, at the prodding of the regulator, is aimed at boosting financial inclusion by introducing mutual funds to lower and middle-income groups. However, it also comes at a time when equities in India are going through a turbulent phase with the benchmark Nifty headed for its longest spell of monthly decline in almost three decades.

Three great reads from Bloomberg today:

The Small-cap Index is already in a bear market, and may soon find a company in its mid-cap counterpart. The Nifty Mid-cap 150 Index has dropped 19% and is on the brink of bear territory, a stark reversal from its 24% gain last year. As investors try to offset their losses in the broader market by selling profitable positions, pressure could build on the bellwether Nifty 50, which is in correction territory right now, with a decline of 14%.

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–With assistance from Chiranjivi Chakraborty and Savio Shetty.

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