10 Years of India’s Market Transformation

Today’s Market Update

The markets opened quite dull today but saw a very nice recovery in the second half of the day, primarily on the prospects of improving Indo-US relations. The momentum shifted after President Trump tweeted that the two nations were "very close to a deal." Regardless of the final outcome, the markets tend to react positively to such news.

Currently, the quarterly results season is underway. Typically, during the results season, markets tend to get stuck within a defined range, preventing major swings.

• Looking at the charts for the Nifty, we saw a very strong pattern today. The index experienced a sharp dip, breaching yesterday's low, but then executed a strong pullback to close above yesterday's high.

• The Nifty Next 50 showed a similar dynamic: a very sharp drop well below yesterday's low, followed by a reversal to close above yesterday's closing, ending up 0.14%.

• Mid Caps are also looking up, closing at a 3-4 day high, up 0.44%.

• The Nifty Bank is also strong, up 0.35% and closing at a multi-day high, potentially forming a flag pattern that could propel it much higher.

• Only Small Caps were holding back, closing down at -0.15%.

• Gold continues its upward trajectory, gaining 0.53% for the day and trading around 12,500 per gram.

• Silver also saw a good recovery, up another 1.1%.

Other Market Triggers

• The Bajaj Twins (Bajaj Finserve and Bajaj Finance) were notably smashed down. However, the rest of the market looked quite green, with good performances from stocks like Indigo, BEL, Mahindra, HCL Tech, HDFC Bank, and ICICI Bank.

• In the Nifty Next 50, Bajaj Holding was down 3.6% and Britannia was down 3%, while gains were seen in HAL (once again), Solar Industries, D Mart, IOC, BPCL, Motherson, Mazdock, and Adani.

• The Mover of the Day was Poly Medicure Ltd., which ran up about 11% following the announcement of a ₹324 crore acquisition of an Italian company.

U.S. Market Update

• US Markets delivered strong returns in their last session, with the S&P 500 up 1.5%, the Dow up 0.8%, and the Nasdaq up a significant 2.2%.

• This relief rally was sparked by the news that the US government shutdown is ending, as both sides of the Senate have agreed to cease the shutdown while negotiations continue.

• US markets look quite good, with several stocks showing impressive gains: Palantir up 8.8%, Nvidia up 5.6% (showing no signs of stopping), Eli Lilly 4.5%, AMD 4%, and Alphabet 4%.

What to watch next ?

• Once the results season concludes in the next few days, that is when the markets usually start their decisive move—either a jump or a drop—toward their next major destination.

• In other economic news, the upcoming inflation data is highly anticipated, and it is expected to remain benign. If inflation remains low, it will provide more flexibility for the RBI to cut rates going forward.

• Similarly, the FOMC in the US is also expected to cut rates during its December meeting. All these factors suggest the market is trying to find its footing somewhere near the current trading range.

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What To Read This Week ?

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🚀 Market Cap Evolution: Decoding the Decade of Growth (2015-2025)

📈 The Big Picture: A Decade of Explosive Growth

The past ten years (2015-2025) have witnessed a remarkable transformation across the three major market capitalization buckets: Large Cap, Mid Cap, and Small Cap. A comparative analysis reveals explosive, and often disproportionate, growth across these segments.

• In 2015, the Large Cap market capitalization stood at ₹70 lakh crore, Mid Cap at a mere ₹12 lakh crore, and Small Cap at ₹5 lakh crore.

• By 2025, the Large Cap market grew roughly 4x to ₹278 lakh crore.

• The Mid Cap segment saw even more impressive growth, expanding to over 7 times its 2015 size.

• Leading the pack was the Small Cap segment, which recorded the highest percentage change, growing nearly 9 times its market cap.

This data clearly indicates that while all segments saw substantial appreciation, the Small and Mid-Cap sectors delivered the most aggressive percentage growth, significantly expanding the overall market size.

📏 Defining the Buckets: A Shifting Landscape

One of the most crucial points highlighted by the data is the drastic change in the definition of these market segments over time. The scale of companies that qualify for each bucket has ballooned, leading to a potential problem for fund managers.

• In 2015, the smallest Mid Cap company (in the top 150) was valued at approximately ₹4,000 crore.

• Today, the smallest Mid Cap company is valued at around ₹33,000 crore.

• The smallest Small Cap company (in the top 250) is now likely to be around ₹6,000 crore.

Key Observation: The market cap of a typical Mid Cap company in 2015 is significantly smaller than what is defined as a Small Cap company today. This suggests that the categories—Large, Mid, and Small Cap—are constantly shifting and expanding, making it challenging for funds with strict category mandates.

🎯 The Portfolio Management Challenge: The "Categorization Trap"

The expanding market cap creates an inherent challenge for fund managers whose portfolios are strictly confined to one category (e.g., a Small Cap Fund).

• If a Small Cap stock with excellent potential grows and crosses the threshold (e.g., into the Mid Cap category by surpassing ₹33,000 crore in value), the Small Cap fund manager is forced to sell that stock.

• The same issue applies to a Mid Cap stock that graduates to the Large Cap segment.

This structure forces the investor (or the fund manager on their behalf) to sell a successful, growing company simply because it has become too successful for the fund's mandate. The speaker emphasizes that investors miss out on the entire growth journey (Small $\rightarrow$ Mid $\rightarrow$ Large Cap) of these rare, high-potential stocks.

💡 Key Learning

The most important takeaway is that investors should seek portfolio strategies that allow them to ride the entire growth trajectory of a company, from Small Cap to Large Cap. A rigid, category-specific fund mandate can force the selling of a potential multi-bagger stock simply because it has appreciated too much.

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