Street Signs: Covid trot to winning run, Avalon Tech's premium, and more

Covid trot to winning run: Banking stocks end FY23 on a sprint

Banking stocks outperformed in the just-concluded financial year (2022-23), with the sectoral gauge gaining 12 per cent, against a 0.6 per cent decline in the benchmark National Stock Exchange Nifty. The Nifty Bank Index has delivered healthy returns during six of the seven earlier financial years. The only exception was the pandemic-stricken 2019-20 when the index plunged 37 per cent. Banking stocks are expected to do well in 2023-24 as well. “With the Nifty likely to underperform debt in calendar 2023, sector skew will play an important role for alpha generation… We continue to favour sectors linked to the capital expenditure upcycle, such as financial… Peak loan growth and net interest margin concerns are overdone,” reads a note by BofA Securities.

Hit a home run: Brokerage stocks unfazed by ASBA trade curveball

Brokerage stocks held their ground, notwithstanding the Securities and Exchange Board of India’s (Sebi’s) board decision to approve the application supported by blocked amount (ASBA) for the secondary market and upstreaming of client funds. Both these measures are expected to make a huge dent in the float income brokerages make. Analysts say broking stocks didn’t fall because Sebi measures were less harsh than anticipated. For one, ASBA has been kept optional, to begin with. Also, Sebi has allowed the upstreaming of funds through a fixed deposit lien, which means brokerages will continue to earn float income. Analysts, however, warn of the full implementation of ASBA possibly eroding as much as 20 per cent of the earnings of some brokerages. In the run-up, brokerages are expected to rework their business model and even consider price hikes.

Avalon Tech’s grey-market premium goes off-colour

Shares of Avalon Technologies (Avalon Tech) were seen changing hands at a premium of less than 5 per cent in the grey market ahead of its initial public offering (IPO) — the fourth listing for this calendar year. Market players, however, say that grey-market volumes are subdued by intermittent primary market activity. Avalon Tech has set a price band for its Rs 865-crore IPO at Rs 415-436 per share, which values the company at Rs 2,847 crore at the top end of the band. The IPO will open for subscription on April 3 and close on April 6. Shares of the electronics manufacturing services company involved in providing full-stack solutions in delivering box-build solutions to original equipment manufacturers are trading between Rs 450 and Rs 460 in the unofficial grey market.