Street signs: Coronavirus scare, arbitrage opportunity in DMart, and more

Fund managers are planning to book profits in poultry and quick service restaurant (QSR) stocks, fearing an adverse impact of the coronavirus outbreak. Experts say people have turned averse to taking out, especially meat products, following the outbreak. Analysts say this could weigh on the March quarter earnings of companies, which  operate in this sector. “Restaurants are seeing a fall in footfall after the outbreak. People are, in general, wary of eating out and are avoiding meat products. This will be reflected in the next quarter numbers of these companies. Already most stocks in these sectors trade at rich valuations. It makes sense to take some money off the table,” said a fund manager requesting anonymity.

 
Sundar Sethuraman
 
Arbitrage opportunity in DMart
 

Savvy investors are looking to cash in on the arbitrage opportunity made available by the offer for sale (OFS) in Avenue Supermarts, which operates the DMart chain. Nearly 1.5 million shares of the company meant for retail investors will be auctioned on Monday. On Friday, the non-retail portion of the OFS was subscribed 3.4 times, with strong demand seen from domestic and foreign institutional investors. While the base price for the OFS is set at Rs 2,049 per share and the cut-off price on Friday was Rs 2,258, it is still below the secondary market price of Rs 2,401. “Some existing investors have sold DMart shares on Friday and will apply in the OFS. They are aiming to pocket gains between 5 per cent and 15 per cent,” said an analyst.

 
Samie Modak
 
Direct plans in AIFs, too?
 
The latest Securities and Exchange Board of India (Sebi) diktat mandates portfolio management service (PMS) providers to give the option to on-board clients directly without an intermediary engaged in distribution services. This has raised expectations that alternative investment fund (AIF) investors will get a similar direct plan option in the coming months as well. The AIF industry has, in general, opposed the move. It remains to be seen whether the market regulator will heed their concerns considering the move may be investor-friendly and result in significant savings for these investors

 
Ashley Coutinho