Mid, SmallCap Stocks May Get Relief From India Opening Pension Pool to Wider Investments

(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. The Fed’s 25-basis-point cut has taken one big global worry off the table, and regional markets are cheering the move. Whether that’s enough to steady Indian equities is unclear after Wednesday’s late slide pulled the market to a near month-low. Mid- and small-cap stocks may get some relief from the regulator allowing pension funds to invest in the Nifty 250 and BSE 250 indices. But with the outlook on a trade deal with Washington still murky and bond yields climbing to three-month highs — pressuring the rupee — investors are watching how long India can hold out against the global “lower for longer” narrative. Also in focus will be monthly mutual fund inflows numbers amid chatter that retail investors are running out of patience.

Iron ore security critical for steel sector     

As India’s mining rules move toward the expiry of captive mines in FY30, securing iron ore is becoming increasingly vital for private steelmakers. Kotak Institutional Equities warns that Tata Steel, whose operating iron ore leases will mostly lapse, could see its cost advantage fade and its operating margins shrink by 30%–40%. In contrast, JSW Steel stands out as the best positioned, with 24 active leases — far more than the two or three held by peers like Jindal Steel. Together, these three majors make up nearly 40% of the Nifty metals index, which is up 17% this year and on track for its sixth consecutive annual gain.

Fuel retailers’ earnings may surprise

Metals may face resource pressures, but another pocket is rising on different drivers. Antique expects state-owned HPCL and BPCL to post stronger-than-expected earnings this year, lifting EBITDA estimates by 7%–10% and calling the second-half outlook “far stronger” than consensus. The main boost comes from improved cooking-gas economics, which should narrow losses from that segment. With crude prices low and gasoline and diesel rates effectively fixed, oil marketers are in a comfortable spot — whether the gains come from marketing or refining. Antique maintains its “buy” rating on both HPCL and BPCL.

Labor laws to boost consumption, help manufacturing

As fuel retailers benefit from steady inputs, new rules could sway the wider economy. Ambit Capital says India’s long-awaited labor reforms may lift consumption — with a minimum wage floor boosting household spending and better working conditions for women reinforcing the trend already seen in industrial states. Easing compliance burdens should also help small businesses expand. Among lenders, HDFC Bank, Karur Vysya Bank, and Five-Star Business Finance stand to gain the most.

Analysts actions:

Three great reads from Bloomberg:

And, finally..      

With the broader Indian markets coming under pressure, shares of exchange operators, depositories and wealth managers have taken a hit. November did hint at some improvement in investor sentiment and even sparked hopes of global funds foreign investors returning — but those expectations haven’t really played out. Brokerages are still seeing a drop in daily orders, even though derivative turnover has held steady, while foreign outflows have reached $17 billion this year, matching the 2022 record. And with bidding for ICICI Prudential AMC’s $1.2 billion share sale kicking off on Friday, investors are likely to keep a close eye on how this space unfolds.

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