Street signs: Arbitrage opportunity from TCS buyback, MFI stocks & more

Brokerages are advising their retail clients to buy shares of TCS to gain from the arbitrage opportunity created by its Rs 18,000-crore buyback

Arbitrage opportunity from TCS buyback

Brokerages are advising their retail clients to buy shares of Tata Consultancy Services (TCS) to gain from the arbitrage opportunity created by its Rs 18,000-crore buyback. The information technology major has fixed the buyback price at Rs 4,500 per share, a premium of 18 per cent to its last close. “We expect the acceptance ratio to be in the range of 30-50 per cent, which could give a potential return of 5-9 per cent with a time frame of 1-2 months. Retail investors looking for short-term opportunities can buy the shares of TCS from the open market and tender them in the buy-back offer,” said a note by Motilal Oswal Securities. The record date for the buyback is February 23.

Tube, Relaxo to gain from FTSE inclusion

Shares of Tube Investments and Relaxo Footwears are likely to see a boost on account of their inclusion in the FTSE India All World Index. According to a note by IIFL Alternative Research, passive investment flows into Tube will be $35 million and another $20 million in Relaxo. The buying will have an impact as it is several times the current delivery-based volumes in these counters, said an analyst. FTSE has also announced 17 new additions to its FTSE India All Cap index. The changes will take effect from March 17, 2022.

Analysts positive on MFI stocks

Shares of microfinance institutions (MFIs) are expected to do well on expectations of higher growth going ahead. According to analysts, most MFIs have achieved near-normal collections and profitability during the December 2021 quarter. Moreover, lenders are hinting at accelerated new customer acquisition, which was muted during the past 6-7 quarters due to Covid-led challenges. “We believe calibrated growth during the past eight quarters (restricted to non-delinquent existing customers) and prudent recognition of the vulnerable borrower pool — thus comprehensive bureau data — would ensure quality growth going ahead,” said a note by ICICI Securities.