ETMarkets Morning Podcast: Stocks pricey, stagger investment in midcap funds

Financial advisers say MLDs emerge good choice for debt investors
Top fund manager says big market correction imminent
Advisers say stocks pricey, stagger investment in midcap funds
Kamal Haasan firm gets ‘Issuer not cooperating’ rating from Crisil

Hi there. Welcome to ETMarkets Morning, the show about money, business and markets. I am Sandeep Singh. Let’s start with a quick glance on the state of the markets.

Dalal Street looked headed for a major correction on Tuesday as Nifty futures on Singapore Exchange traded with a sharp cut. Asian stocks slid after a technology stocks-led tumble on Wall Street as surging commodity prices stoked concern about inflation. On Wall Street, the Nasdaq Composite index dropped 2.6% to post its worst day since March, as technology stocks came under heavy selling pressure as traders rotated away from high growth stocks that could be impacted by rising inflation. The US dollar pared a decline. In commodities, oil retreated as traders monitored the worsening fallout from the closure of the largest US oil products pipeline, but gold traded little changed at $1,837.16 an ounce.

That said, here’s what else is making news.

While debt returns have been rather depressed, with rates plunging to record lows, some financial planners are recommending MLDs or market-linked debentures, a product being offered by the likes of Piramal Finance, Shriram Transport Finance, TPG-backed Five Star Financial and the IIFL Group. This instrument offers indicative yields ranging from 7.20% to 9.10% annualised for about 18-24 month maturities, dealers said.

A top Indian equity fund manager is warning of a sharp market correction, saying that investors in India’s $2.8 trillion equity market are underestimating the economic impact from the world’s worst coronavirus outbreak. The second wave will delay any recovery and could trigger a “correction” in stocks, said Samir Rachh, who manages Rs 13,000 crore of assets at Nippon India Mutual Fund. He said recent gains in stocks have been “driven by a huge amount of liquidity,” and the market “is completely ignoring the current situation.”

Investment advisors are asking mutual fund investors to put money in midcap funds in a staggered manner over the next few months. After outperforming blue chips so far in 2021, valuations of midcap stocks are not cheap, yet there could be room for more upsides. Midcap products run by Axis Mutual, Motilal Oswal, Union and Invesco are the top picks of advisers.

About a dozen domestic companies witnessed simultaneous increase in holdings by promoters, domestic mutual funds as well as foreign portfolio investors during the March quarter, drawing investor attention to these stocks. Promoters or insiders raising their holdings in companies is usually considered a reliable indicator of the prospects of the company and its shares. And when large institutional investors follow suit, the bullish signals only get stronger. This is exactly what has happened in these stocks to draw bigger investor attention.

As lockdowns and mobility restrictions made a comeback across the country due to a massive surge in Covid cases, the auto industry saw April sales at retail points slip by 28% month-on-month compared with their March numbers. No comparison has been made to sales made in the same month last year (April 2020) as the country was under a complete shutdown then after the outbreak of the coronavirus, which saw all auto companies announce ‘zero’ sales.

And lastly, Crisil has announced a rating of — ‘B+/Stable Issuer not cooperating’ — on the long-term bank facilities of Kamal Haasan, a proprietary firm of the eponymous actor-turned-politician. The rating agency, which rated him for a loan taken earlier at ‘B+ or stable’ in January 2020, said Monday’s move was due to inadequate information and lack of management cooperation from the company. This non-cooperation has restricted Crisil’s ability to take a forward-looking view on the entity’s credit quality.

NOW Before I go, here is a look at some of the stocks buzzing this morning.

JSPL has made a prepayment of Rs 2,462 crore to its term lenders, a move in line with its long-stated financial strategy of debt reduction and strengthening its balance sheet with the optimum capital mix.

IndiGo on Monday said its board had approved fundraising of up to Rs 3,000 crore via a qualified institutional placement of shares.

PNB is looking to raise up to Rs 1,800 crore by selling shares to institutional investors, about 44% its targeted fund raising announced earlier.

IOC has reduced the throughput of MEG at its Panipat refinery to maximise supply of medical-grade oxygen to hospitals in Delhi and other states.

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!