▼ Nifty: 11,440 (-0.21%) ▼ Sensex: 38,756 (-0.25%)
Today, the broader markets started the day on a positive note with a gap-up opening on the Nifty50 index. They were aided by a rise in IT stocks and positive sentiments toward midcap and smallcap shares. However, selling in shares of banks and NBFCs in the second half of the day drove the Nifty50 to end in the negative territory. Among the indices, the Nifty IT index was up 4.4%, whereas Nifty Bank index was down 1.7%.
Here are the top stories of the day.
Small and midcap stocks surge after SEBI circular on multi-cap funds
As per the latest SEBI circular, multicap funds must invest a minimum of 25% each in large, mid, and smallcap stocks, in order to diversify investments and be 'true to label'. SEBI has allowed flexibility in the investment of the remaining 25% funds, which could include cash. This tweak in asset allocation guidelines has given a sentimental boost to the midcap and smallcap stocks, in anticipation that they would receive about ₹30,000–40,000 crore of investments from the funds. The Nifty Smallcap 100 and Nifty Midcap 100 indices were up 5.5% and 2.6%, respectively. In the Nifty Midcap 100, Ashok Leyland (+9.6%), Prestige Estates (+7.8%) and Oberoi Realty (+6.0%) were top gainers. Similarly, in the Nifty Smallcap 100, Century Ply (+11.1%), Kajaria Ceramics (+9.9%) and CanFin Homes (+8.2%) led the pack. However, it must be noted that fund managers have until 31 January 2021 to comply with the above guidelines.
HCL Tech soars on higher Q2 forecasts
IT services major, HCL Technologies has raised the guidance for its Q2 performance. The company expects Q2 revenues to grow over 3.5% on a quarter-on-quarter basis (versus 1.5% to 2.5% guided earlier). Similarly, it also expects EBIT margin for Q2 to be around 20.5% to 21.0% (higher than 19.5% to 20.5% previously guided for FY21). In response, shares of HCL Tech zoomed up 10.6%. The company is seeing a healthy pipeline of orders across service lines and geographies. The upward revision in guidance reflects positive trends in IT-related spends in the US and Europe (aided by massive fiscal stimulus packages by governments). Other IT stocks also showed strong buying momentum: Infosys (+2.9%), TCS (+4.8%) and Mphasis (+8.8%) saw healthy gains.
Public sector banks could get ₹20,000 crore boost
As per reports, the government could infuse ₹20,000 crore into public sector banks. Earlier, in July, the RBI governor mentioned that recapitalisation of PSU banks was necessary due to the risk of bad loans and increasing vulnerability in the financial sector resulting from the Covid-19 pandemic. Select PSU bank stocks gained in an otherwise subdued market; UCO Bank (+10.3%), Indian Bank (+2.9%) and Bank of Maharashtra (+1.9%) closed in the green.
The positive start today overshadowed the double-digit contraction (-10.4% in July) in the Index of Industrial Production (IIP) announced last Friday. However, markets saw a reality check towards the end of the day. Further, the consumer price inflation data will be announced in the evening today, which will provide further cues to the market tomorrow.