How will swing pricing work in your mutual fund?

Hi there, Good Morning. Welcome to ETMarkets Morning podcast, the show about money, business and markets. I am Sabari Saran. Let's start with the headlines first

Value bets take centerstage on Dalal Street
NCLAT stays Videocon selloff to Vedanta
HCL Tech likely to remain under pressure
Govt looks to sell off ITC stake

Now lemme give you a quick glance on the state of the markets.

Dalal Street looked headed for a weak start this morning. Nifty futures on the Singapore Exchange traded some 37 points down at 7 hours (IST). The global stocks selloff continued in the rest of Asia too after a surge in Delta variant infections sparked a broad selloff on Wall Street overnight. Dow fell some 725 points, or 2.09%

Elsewhere, Long-term US Treasury rates ticked up. The dollar held gains while the yen steadied. Bitcoin traded just above the closely watched $30,000 level. Oil stabilised after sinking on an Opec+ deal to boost supply into 2022. WTI crude rose 0.5% to $66.78 a barrel.

That said, here’s what is making news?

Value stocks continue to lure investors amid higher market volatility. The Nifty500 Value 50 index has gained 86% over the past 12 months compared with the 46% return of the benchmark Nifty 50. This is contrary to the trend in the past decade where the Nifty gained 13.3% annually compared with 6.8% gain in the value index. Lofty valuations of the growth stocks and expectations of lower real rates in the near term have raised the appeal of value stocks. The Nifty500 Value 50 index trades at a trailing P/E multiple of 9.3 with a dividend yield of 2.9% while the Nifty50 trades at P/E of 28.3 with a dividend yield of 1.3%.

Sebi has proposed to introduce the concept of ‘swing pricing’ in mutual fund schemes in a bid to reduce first-mover advantage during redemption pressures in schemes. Swing pricing is a mechanism by which fund houses can adjust a scheme’s net asset value (NAV) in response to the flows into or out of the fund. It could also reduce the impact of redemptions on existing investors by reducing dilution of the value of a fund’s units. When swing pricing is triggered on account of higher-than-average inflows or redemptions, the NAV of a scheme gets adjusted up or down, resulting in the investor subscribing or pulling out bearing the trading costs rather than existing unitholders.

The government is considering the disinvestment of its holding in ITC as it looks to meet the ambitious disinvestment target for the year. At Monday’s closing price of Rs 207.8 a share, the government’s 7.93% stake in the cigarettes and consumer goods to hotels conglomerate is worth Rs 20,250 crore. The government holds the stake in ITC through the Special Undertaking of the Unit Trust of India (SUUTI).

The stock of HCL Technologies has been moving in a tight range over the past six months while its close peers Wipro and Infosys have delivered double-digit returns. Given its weak performance in the June quarter against its peers, HCL Tech’s stock may remain under pressure in the near term while a sustained deal momentum and headcount addition may offer medium term support. The country’s third-largest software exporter grew its revenue by 0.9% sequentially in the June quarter to $2,720 million compared with the expectation of a 2.2% growth.

LASTLY,
The NCLAT has stayed the sale of the Videocon group of companies to Vedanta’s Twin Star Technologies. Bank of Maharashtra, which has a small portion of the loan, had appealed against the order under which creditors were to get around 4% of the admitted claims of Rs 64,838 crore. BoM had raised two main objections — the sale price was close to the liquidation price, and even the 4% that was being paid was largely in the form of debentures with very little cash coming in.

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

IT industry pioneer Shiv Nadar has stepped down as managing director of HCL Technologies, the company he founded along with seven others in 1976 and built into India’s third largest IT services firm.

Reliance Retail plans to open around 5,000 outlets that will be convenience store, pharmacy, diagnostic centre, telecom services and financial services products outlet all rolled into one across the country,

Sebi and the Directorate of Revenue Intelligence (DRI) are investigating some Adani Group companies, minister of state for finance Pankaj Chaudhary told the Lok Sabha on Monday.

Cement maker ACC on Monday reported a 109% jump in consolidated net profit for the second quarter of FY22, at Rs 569 crore against Rs 271 crore during the same period last year.


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 with us for all the market news through the day. Happy investing