Street Signs: FPIs pare short positions, IPO Street waiting for a boost

FPIs backpedal on shorts as market gains ground

 

The market’s recent 3 per cent upmove has coincided with foreign portfolio investors (FPIs) reducing their short positions. Market observers say FPIs have more than halved their short open interest (OI) positions from 350,000 contracts two weeks ago. However, they entered the February series with a net short index futures OI of 173,000 contracts, compared to 155,000 at the start of the January expiry. Experts say a continued market uptrend could force some FPIs to cover their shorts, further boosting the market. From its seven-month low of 22,829, the Nifty has risen 653 points, or 2.78 per cent, to 23,482. The index could test 23,750 in the near term, an expert said.  

 

IPO pipeline runs dry, waiting for a refill

 

Fundraising through initial public offerings (IPOs) slowed sharply in January, with six companies raising Rs 4,845 crore — an 80 per cent drop from the Rs 25,439 crore raised by 15 firms in December. Market participants attributed the decline to weakness in the secondary market, which has dampened investor sentiment. While broader markets had remained relatively stable since September, smallcap stocks saw a sharp correction in January, prompting companies in the segment to put IPO plans on hold. “We may not see many IPOs in the near term, except possibly from the consumption sector, which has received a boost from the Union Budget,” said a banker.

 

  Parent’s stake sale triggers a Whirlpool in the market

 

US-based Whirlpool Corporation’s plan to sell a 31 per cent stake in its domestic unit, Whirlpool of India, triggered a sharp selloff. Shares of the home appliance maker have lost a fourth of their value, erasing Rs 14,940 crore in market capitalisation since the announcement on Thursday. Market players attributed the decline to the lower sale valuation set by the parent firm. “Whirlpool Corporation expects to raise $550–600 million (Rs 4,600–5,100 crore) by selling 30 per cent of its stake in the Indian subsidiary. This implies a valuation of Rs 15,300–17,000 crore for Whirlpool of India. Before the announcement, the Indian company was trading at a Rs 19,200 crore valuation — well above the parent’s implied valuation,” said analyst Nimish Maheshwari of Beat the Street, who publishes on Smartkarma. With the share sale overhang, the stock’s performance may remain soft.