MFs fear redemption pressure
The steep correction in the markets
has got mutual fund (MF) players worried over the rise in redemptions from equity fund investors. "Returns have continued to remain bogged down due to market volatility. The recent sell-off can further stoke concerns and lead to a spike in redemption requests from MF investors. We are already seeing some spike in redemptions in the current month, but will have to wait for the full month to see the impact," said a senior executive of a fund house. In July, equity funds had seen over Rs 12,000 crore of redemptions.
Nestle weak despite Nifty inclusion
Shares of Nestle
India have remained soft even after news
of it being added to the Nifty index later this month. Many see this as a case of ‘buy on rumour and sell on news’. Market players say some traders had built aggressive positions in the counter even before the Nifty inclusion announcement came. “Speculation was rife that Nestle
would make it to the Nifty after the NSE changed the selection criteria. Pre-empting the move, some traders went long on the stock and later covered their positions after the announcement, which has weighed on the stock price,” said a broker. Many believe inclusion in the benchmark index is a positive trigger as it leads to passive inflows but in the long-run, the stocks tend to underperform. “In many cases, we have seen the best is behind for a company when it gets added to the benchmark,” added the broker.
The lull in the primary market has hit investment bankers
hard. No initial public offering (IPO) has hit the market in over a month and there is nothing in the impipeline. Few companies are showing interest to go public given the challenging market conditions. Industry sources say investment bankers
are trying hard to find new deals. “A lot of bankers don’t bid for mandates that are below Rs 500 crore. However, we are seeing bankers trying to get their hand at whatever that’s available. This can be gauged from the interest received for tenders floated for small-sized state-owned entities,” said an investment banker. In the past, most bankers were seen shunning small government IPOs.