Sensex Opens Marginally Up; All Eyes on Modi's Cabinet Formation

Thu, 30 May 09:30 am

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Asian share markets are lower today as Chinese and Hong Kong shares fall. The Shanghai Composite is off 0.8% while the Hang Seng is down 0.6%. The Nikkei 225 is trading down by 0.9%. US stocks fell on Wednesday, with the S&P 500 and Nasdaq closing just above key support levels, as worries that a lengthy US-China trade war would crimp global growth pushed investors into the safety of government bonds.

Back home, India share markets opened marginally higher. The BSE Sensex is trading up by 73 points while the NSE Nifty is trading up by 25 points. The BSE Mid Cap index and BSE Small Cap index opened up by 0.2% and 0.1% respectively.

Barring metal and automobile stocks, all sectoral indices have opened the day in green with power and realty stocks leading the pack of gainers.

The rupee is currently trading at 69.71 against the US$.

In the news from the economy. Prime Minister Narendra Modi will take oath along with a new council of ministers today for a second term at a function at Rashtrapati Bhavan, amid suspense on who will get the Big Four - Home, Finance, Defence and External Affairs Cabinet berths.

President Ram Nath Kovind will administer the oath of office and secrecy to 68-year-old Modi and his ministerial colleagues.

Modi paid tribute to Mahatma Gandhi at Rajghat early morning today and will also pay tribute to Atal Bihari Vajpayee at his memorial Sadaiv Atal Samadhi in New Delhi ahead of his oath taking ceremony.

Speaking of Indian share markets, what should be your investing strategy be for Modi's second term?

As per Richa Agarwal, Modi's victory seems to be the inflection point for a rebound in smallcap stocks.

In the last week itself, the small cap index is up nearly 8%. And this is just the beginning...

You see, over the last one and a half year, a huge gap has emerged between smallcap index and Sensex.

Despite a lackluster performance on earnings front for both, smallcap stocks crashed...while Sensex flirted with lifetime highs.

Have a look at the chart below.

Since Jan 2018, the Sensex has gained 14% while smallcap index has lost 25%. That's a relative underperformance of 39%.

But this dichotomy cannot keep on growing forever.

As Richa writes in today's edition of The 5 Minute WrapUp...

• You see, last time the market showed a similar trend was in the year 2013...just before Modi rose to power.
  
  Between January 2013 to August 2013, the smallcap index has crashed by over 30%, while Sensex stayed put. And smallcaps were approached with the same scepticism they have witnessed over the last year.
  
  But what happened after that was even more interesting.
  
  Within a few months post August 2013, the smallcap index caught up with the Sensex. And it didn't just catch up.
  
  Under Modi's first term, until January 2018, the smallcap index rose nearly four times versus a less than 2 times gain in Sensex.

As per Richa, history is going to repeat itself.

If you are interested in riding the volatility and earning great returns in the long term, you could join Richa's small cap club and invest in these 4 solid small caps.

Moving on to the news from the currencies space. The Indian rupee opened higher by 11 paise at 69.72 per dollar today versus previous close 69.83.

The local currency fell for the second straight day on May 29 as it lost 14 paise to end the session at 69.83 against the US dollar.

Rupee was weighed down in yesterday's session following broad strength in the dollar against its major crosses. Volatility for the currency could remain low ahead of important economic numbers that will be released tomorrow.

GDP and fiscal number that will be released on the domestic front could set the tone for RBI meeting that is scheduled next week.

Expectation is that the central bank could cut rates and a dovish stance could keep the rupee weighed down. Broadly, trade war concern is keeping most market participants on the edge.

To know what's moving the Indian stock markets today, check out the most recent share market updates here.

For information on how to pick stocks that have the potential to deliver big returns, download our special report now!

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