Fatigue in bluechips sparking rally in mid- and small-caps

Hi there, Good Morning. Welcome to ETMarkets Morning, the show about money, business and markets. I am Nikhil Agarwal. Let's start with the headlines first.

- Fed signals bond-buying taper may start soon
- UK riles India with vax certificate snub
- Japan's Kubota may raise stake in Escorts
- WHO raises bar for air quality

Now lemme give you a quick glance on the state of the markets.

Dalal Street is likely to have a positive start this morning. Nifty futures on the Singapore Exchange traded 103 points higher at 8:20 hours (IST). Asian shares were mostly higher on Thursday after the Federal Reserve signaled it may begin easing its extraordinary support measures for the economy later this year. Shares rose in Hong Kong, Shanghai and Australia. Markets were closed in Tokyo.

Elsewhere, the yield on 10-year Treasuries declined two basis points to 1.30%. The dollar hit its highest in a month on Thursday and pressed the euro towards major support levels, after the Federal Reserve set the stage for rate hikes next year -- far sooner than its developed market peers are expected to move. Oil prices rose on Thursday, extending strong gains overnight with fuel demand growing and crude stocks declining as production remains hampered in the U.S. Gulf of Mexico after two hurricanes. Brent crude futures rose 17 cents, or 0.2%, to $76.36 a barrel.

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That said, here’s what is making news.

With a 21% growth in assets under management between March and August aided by strong equity flows and improving systematic investment plans (SIP) books, asset management companies are headed for strong re-rating, say analysts. Net inflow from equity funds so far in FY22 was Rs 45,000 crore, compared with a cumulative outflow of Rs 43,400 crore in FY21. Among the listed AMCs, Nippon Life has grown equity AUM by 18% between March and August, while UTI AMC and HDFC AMC reported growths of 23% and 12%, respectively, in the period. UTI, which rallied 40% in three months, is still trading at a valuation of 23 times FY23 estimated PE, which is a discount of 44% and 32% to HDFC AMC and Nippon, respectively.

Mid- and small-cap stocks are back to their winning ways after a spell of weakness in July and August. With the rally in blue chips showing signs of fatigue after spearheading the record-breaking market rally in the past two months, analysts say smaller shares are better placed to gain in the near future. Edelweiss Securities said trends of the past decade and a half showed relative performances between large-cap, small- and mid-cap indices usually result in reversion to mean. SmallCap and Midcap indices are up 3.4% and 5.5%, respectively, so far in September. The Sensex is up 2.4% during the same period.

Freshworks Inc., the first Indian software maker to list on Nasdaq, raised over $1.03 billion in its initial public offering (IPO) while recording market capitalisation of $10.13 billion, triggering elation among startup mavens who expect the listing to open the floodgates for other mega product companies from the country. Company's co-founder and CEO Girish Mathrubootham said that apart from opening the door for other Indian SaaS firms to go public, the Freshworks IPO has created a lot of wealth for his employees. Over 500 staff have become crorepatis, 69 of them under the age of 30, he said.


LASTLY,

Federal Reserve Chair Jerome Powell said the US central bank could begin scaling back asset purchases in November and complete the process by mid-2022, after officials revealed a growing inclination to raise interest rates next year. Powell, explaining the US central bank’s first steps toward withdrawing emergency pandemic support for the economy, told reporters Wednesday that tapering “could come as soon as the next meeting.” That refers to the policy gathering on Nov. 2-3, though he left the door open to waiting longer if needed and stressed that tapering was not meant to start a countdown to liftoff from zero interest rates.

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NOW Before I go, here is a look at some of the stocks buzzing this morning...


Adani Ports & Special Economic Zone (APSEZ) said on Wednesday that it concluded the acquisition of a 10.4% stake that the Andhra Pradesh government held in Gangavaram Port (GPL) for Rs 645 crore.


BSE-listed Kalpataru Power Transmission has won an arbitration
award of more than $32 million (about Rs 236 crore) against the Rwanda Energy Group.

IT solutions provider Mphasis has acquired Blink UX, a user experience research, strategy, and design firm, for about $94 million in an all-cash deal.

IDFC Ltd shareholders on Wednesday rejected the proposal to appoint Vinod Rai as a non-independent, non-executive director on the company’s board at its annual general meeting.


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Do also check out over two dozen stock recommendations for today's trade from top analysts on ETMarkets.com.

That’s it for now. Stay with us for all the market news through the day. Happy investing!