Domestic shares set to open flat; all eyes on small-, mid-cap funds’ stress tests

Domestic shares are set to open little changed on Friday, as investors brace for the results of a stress test of small- and mid-cap mutual funds amid concerns of froth in these segments, while global stocks fell on rising worries over the future rate trajectory in the US.

The GIFT Nifty was trading at 22,144 as of 08:01 a.m. IST, indicating that the Nifty 50 will open near Thursday’s close of 21,146.65.

Asian markets declined, with the MSCI Asia ex-Japan losing 1.1%. Wall Street equities closed lower overnight after data showed hotter-than-expected US producer price index inflation in February.

The data, which followed sticky consumer inflation earlier in the week, added to worries of a delay in the onset of interest rate cuts from the Federal Reserve this year.

Blue-chip indexes, Nifty 50 and Sensex are down about 1.5% so far this week, on profit booking after they hit record highs on March 7.

The broader, more domestically-focussed small- and mid-caps have lost about 6% and 4% over the last four sessions, after the markets regulator flagged likely froth and irrational exuberance in the segments.

Investors will focus on the results of stress tests of small- and mid-cap mutual funds, which have started trickling in. The stress tests will help gauge the funds’ resilience to sudden redemption pressures.

Small- and mid-caps have lost 11.4% and 5.8%, respectively, from their record highs on February 8, compared to a 2% rise in Nifty 50.

Most of the small- and mid-cap stocks are at lofty valuations and many low quality stocks still have a long way to fall, analysts at Kotak Institutional Equities said.

Foreign portfolio investors sold Indian shares worth ₹1,356 crore (about $163 million) on a net basis on Thursday. Domestic institutional investors bought a net ₹139 crore of stocks.


** Bharat Petroleum Corporation, Hindustan Petroleum Corporation and Indian Oil Corporation: Companies announced a cut in petrol and diesel prices by 2 rupees per litre, effective from Friday.

** One 97 Communications: Digital payments company Paytm was granted a third-party application provider licence by country’s payments authority, which will enable it to facilitate payments after its banking unit ceases operations.

** Railtel Corporation of India: Company received a work order worth ₹113 crore related to a network connectivity project in Odisha. ($1 = 82.9580 Indian rupees)

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