Street signs: Bonds, mid-caps hurt MFs, YES Bank not in sync, and more

The unusually high volatility is leading to a drop in participation in the derivatives market
Bonds, mid-caps hurt balanced MFs 

The market sell-off has hit balanced mutual fund schemes, where investors seek lower volatility from a mixed portfolio of equity and debt investments. In year-to-date, such schemes have given negative returns of over 21 per cent. According to industry experts, while these schemes have fallen 4-5 percentage points less than other equity schemes, allocation towards mid-cap stocks has taken a toll on their returns. Further, the debt markets have also seen a tough environment as liquidity has got tighter with overseas investors pulling out over Rs 64,000 crore worth of investments from debt markets in current calendar year. "Yields have spiked in long-duration debt papers, which have hurt the debt component of these schemes," said an industry expert.  

High volatility, low interest

The unusually high volatility is leading to a drop in participation in the derivatives market. The Nifty open interest (OI) at the start of the April series was just 10 million contracts, which according to analysts, is the lowest in 10 years. Further, the rollovers and OI in the Bank Nifty, second-most traded index after the Nifty, too is significantly below historical averages. Market players say high implied volatility (IVs) is leading to pricing anomalies and discouraging traders from building huge positions. “Until we see IVs cooling off, we will continue to see low volumes and erratic stock movements,” said an analyst. 

Samie Modak

YES Bank not in sync  

Shares of YES Bank have plunged 33 per cent in the last four trading sessions, even as the Bank Nifty index has gained 18 per cent. From its March highs of Rs 61, which it touched post the State Bank of India (SBI)-led restructuring, the stock has more than halved. Market experts said investors need to be careful while dealing in the counter till the time the stock finds its “real value”. “Shares of YES Bank rose from Rs 6 to Rs 60 without much fundamental basis. In the last few trading sessions, the stock has dropped to more realistic value. The price trajectory is very suspicious, and could be partly because of complications surrounding lock-in and Nifty expulsion. Investors who want to bet on the bank’s revival should wait for a few weeks before building positions,” said a market expert.

Samie Modak

Business Standard is now on Telegram.
For insightful reports and views on business, markets, politics and other issues, subscribe to our official Telegram channel