Street signs: July-rebound theory fails, index funds get popular, and more

July-rebound theory fails

 

Before the start of this month, a theory doing the rounds was that investors should build long positions as the markets tend to jump sharply in July from their June lows. In the past 26 years, the benchmark Sensex has jumped an average 12.3 per cent from its June lows to July highs. Investors who placed bets based on this theory, however, are caught on the wrong foot this year. The Sensex difference between June 2019 lows and July 2019 highs is only 3 per cent, far less than the average 10 per cent of the past 10 years. Most shares have declined in July amid sharp sell-off by foreign portfolio investors (FPIs) hurt by the increase in tax surcharge, announced in the Union Budget on July 5.

Samie Modak

Affle India commands 20% premium

Shares of Affle India are commanding a premium of 20 per cent in the grey market. The Microsoft-backed mobile marketing firm’s Rs 460-crore initial public offering (IPO) opens on Monday. The price band for the issue is Rs 740-Rs 745 per share. Shares of the company are changing hands at close to Rs 900 in the grey market, according to market players. At Rs 745, the IPO is priced at 39 times (post dilution) its 2018-19 consolidated earnings. Experts say Affle’s niche business and growth prospects make it an attractive bet despite high valuations.            

    

Sundar Sethuraman

Index funds get popular online 

Savvy investors on digital platforms are showing increased interest in index funds. The investor inflow seen in these funds has jumped by a significant quantum over the last three months. In April, the category saw a paltry Rs 17 crore of inflows. Between May and June, the category garnered Rs 410 crore of inflows. Index funds are cheaper for investors given the low expense ratios charged on these products. However, index funds are yet to gain any meaningful size in the Rs 24-trillion mutual fund industry. At the end of June, the category size stood at Rs 5,719 crore. "MF investors who are well-aware of the costs related to investing and such funds' popularity in more advanced markets, are making these allocations," said Vaibhav Shah, vice-president, Orowealth, an online advisory.

Jash Kriplani