ETMarkets Morning Podcast: D-Street shows high risk appetite with big bets in small stocks
3 FPI accounts with large Adani exposure frozen
Growing bets in smaller stocks shows higher risk appetite on D-Street
Smart traders try to seize the opportunity of record low volatility
Preferential share holders in quandary after adverse SC order
Now let me give you a quick glance on the state of the markets.
Dalal Street looked headed for a gap-down start as Nifty futures on the Singapore Exchange traded 70 points lower ahead of the opening of Indian markets. Stocks in other Asian markets traded mixed in holiday-thinned trading, as investors prepared for a key meeting of the US Fed later this week.
Elsewhere, the 10-year US Treasury yields inched up to around 1.46% after hitting three-month lows on Thursday. The dollar was steady against Group-of-10 peers. Bitcoin jumped above $39,000 after Elon Musk said Tesla would resume transactions with the cryptocurrency when mining is done with more clean energy. Oil futures were little changed. WTI crude traded steady at $70.95 a barrel.
That said, here’s what is making news.
NSDL has frozen the accounts of three foreign funds — Albula Investment Fund, Cresta Fund and APMS Investment Fund — which together own over Rs 43,500 crore worth of shares in four Adani Group companies. These accounts were frozen on or before May 31, as per the depository’s website. The freeze on the three accounts could be because of insufficient disclosure of information regarding beneficial ownership as per the Prevention of Money Laundering Act, said top officials at custodian banks and law firms handling foreign investors.
While the Sensex and Nifty inched laboriously to record highs last week, the absence of big moves by the usual index-influencing bluechip stocks put a lid on gains as foreign fund flows fluctuated. But a look beneath the surface showed in contrast to the sedate moves in largecaps, which form the Sensex and Nifty, many illiquid smaller and penny stocks are seeing one of the strongest moves in recent years. This suggests strong appetite for higher risks and returns among individual investors.
Smart derivatives traders have seized an opportunity thrown up by the year-to-date lowest volatility by initiating a long straddle on weekly Nifty options. A long straddle is a market neutral strategy, whose profitability depends on market movement rather than on which direction it moves. It involves a trader purchasing a call and a put on the Nifty. A Call buyer is bullish while a put buyer is bearish.
Holders of optionally convertible redeemable preference shares are in a quandary after the Supreme Court ruled recently that investors do not have a “sacrosanct” right to redeem such instruments. The top court also made clear that investors cannot redeem such shares before the National Company Law Tribunal has ruled either way — whether investors can convert such shares or not — under the Insolvency and Bankruptcy Code.
Lastly, companies with big purses in May withdrew large cash from overnight and liquid funds, where they park their short-term surplus cash. These funds saw a net outflow of Rs 57,020 crore in May, reflecting the urgency to hold immediate cash. Low yields also prompted the companies to retreat. Investors liquidated a net of Rs 45,447 crore from liquid funds and Rs 11,573 crore from overnight funds, Amfi data showed.
Before I go, here is a look at some of the stocks buzzing this morning.
Reliance Power, which is part of Anil Ambani Group, plans to raise Rs 1,325 crore from its promoters to reduce debt.
Infosys added nearly 3,000 employees in the US, taking the tally to 30,938 in FY21, from 28,162 in the year before, a filing to the US SEC showed.
Canara Bank will be the lead sponsor — and biggest shareholder — of the National Asset Reconstruction Company, contributing up to 12% equity to it.
Edible oil firm Ruchi Soya, which is owned by Baba Ramdev-led Patanjali Ayurveda, has filed draft document with Sebi to launch an FPO for raising up to Rs 4,300 crore.
Do also check out over two dozen stock recommendations for today’s trade from top analysts on ETMarkets.com.
That’s it for now. Stay put with us for all the market news through the day. Happy investing!
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