Sensex Trades Over 200 Points Higher, Dow Futures Down By 39 Points

Wipro sold the stake as Private Equity player KKR acquired Ensono.

Meanwhile, Wipro also announced that it has acquired a minority stake of less than 20% on a fully diluted basis in US-based IT incident response services provider Squadcast for US$ 1.2 m. The transaction is expected to be completed during the quarter ending June 2021.

How this pans out remains to be seen. Meanwhile, stay tuned for more updates from this space.

Speaking of the current stock market scenario, note that the BSE Small Cap index touched a lifetime high recently.

Despite the index being up more than 157% since the March 2020 lows, Richa Agarwal, lead Small Cap Analyst at Equitymaster, believes smallcap stocks are set for a massive up move in 2021 and beyond.

Here's why...

As per Richa, the small cap to Sensex ratio is a good metric to gauge while coming to some conclusions about relative valuations.

So, what is this indicator suggesting now?

As you can see from the chart below, the ratio currently stands at 0.46 times, as compared to the long-term average of 0.43 times.

Here's what she wrote about it in a recent edition of Profit Hunter:

  • In the last one year, the small caps have done well to cover the gaps with the large peers.

    But it could be premature to call this a peak.

    In the previous two rounds, the average ratio has been 0.57, suggesting more upside from these levels.

Richa believes if you focus on the quality of business, margin of safety in valuations, and an optimum asset allocation, you are likely to create huge wealth for yourself.

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Disclosure: Equitymaster Agora Research Private Limited (Research Analyst) bearing Registration No. INH000000537 (hereinafter referred as 'Equitymaster') is an independent equity research ...

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