Street signs: Market to see churn by equity funds

For the first time, the Securities and Exchange Board of India (Sebi) has defined large-caps as the top 100 companies in terms of capitalisation, mid-caps as the top 101 to 250 companies, and the rest being small-caps. The move is likely to see a huge churn in portfolios by equity mutual funds (MFs), adding to market volatility. Until now, MFs followed their own definitions. “With the regulator clearly categorising stocks, several stocks in large-cap or mid-cap portfolios would become ineligible after the six-month periodic reviews. This will warrant a lot of buying and selling by funds,” said an industry player.

Samie Modak

 
JSPL turnaround relief for MFs

Mutual fund houses, which had burnt their fingers in Jindal Steel and Power’s (JSPL’s) debt papers due to multiple downgrades two years back, have a reason to celebrate. The company is turning around, as its consolidated sales have improved. Consolidated losses are also down significantly, and its stock price is reflecting the change of fortune. In the past year, the stock has moved from Rs 60-70 levels to Rs 152 on October 6. Industry players say this turnaround will especially help fund houses such as ICICI Prudential and Franklin Templeton, which had significant exposures to its debt papers. The latter fund house, in fact, had bought JSPL’s debt papers from its schemes at a loss.

Joydeep Ghosh

 
Bankers tap locals as FII flows dry
 
Investment bankers are in a fix as initial public offering (IPO) pipeline remains strong but foreign flows have dried up from the domestic markets. This has forced bankers to aggressively tap domestic institutional investors (DIIs), especially mutual funds, which are flush with funds. “Earlier, any IPO used to see 70 per cent subscription from foreign portfolio investors and 30 per cent from DIIs. The mix is now changing in favour of DIIs,” said a banker.
 

Samie Modak