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Change in NAV Rules for Mutual Funds, CAMS IPO, and Top Buzzing Stocks Today
Mon, 21 Sep Pre-Open

Indian share markets ended marginally lower on Friday.

Benchmark indices witnessed a sudden decline in the last hour of trading, amid selling seen in banking and finance stocks.

At the closing bell on Friday, the BSE Sensex stood lower by 134 points. Meanwhile, the NSE Nifty ended down by 11 points.

HDFC Bank was the top loser in NSE. Meanwhile, the top gainers in NSE were Dr Reddy's Laboratories and Cipla.

The BSE Mid Cap index ended up by 0.3%. The BSE Small Cap index ended down by 0.3%.

On the sectoral front, finance stocks and banking stocks witnessed selling pressure. Pharma stocks, on the other hand witnessed buying interest.

Gold prices were trading up by 0.3% at Rs 51,605 per 10 grams at the time of closing stock market hours on Friday last week.

Even with the recent volatility in prices, gold and silver remain among the best performing commodities this year to combat the fallout from the coronavirus pandemic.

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Top Stocks in Focus Today

Dr Reddy's Lab will be among the top buzzing stocks today.

Dr Reddy's Lab share price surged over 12% to hit a fresh record high of Rs 5,497 on the BSE on Friday, after the company entered into a settlement agreement with Celgene Corp.

The stock gained as much as 15% during the last three days last week after the firm said it has been roped-in by Russia-based Russian Direct Investment Fund (RDIF) to distribute 100 million Covid-19 vaccine doses in India.

From the packaging sector, Essel Propack will be in focus today. Shares of Essel Propack fell over 6% today after 83.2 million shares changed hands on the NSE and BSE on Friday. According to media reports, Epsilon Bidco Pte, a Blackstone entity which owns 75% of Essel Propack, was looking to sell up to 23% stake to garner as much as US$ 251 million.

Market participants will also track Hindalco share price as it was reported that the company and Hindustan Copper signed a Memorandum of Understanding (MoU) for long-term purchase and sale of copper concentrate produced by the latter.

With this partnership, the companies have moved towards import substitution, reducing the nation's dependence on copper concentrate sourced from abroad.

MF Space: New Norms for Assigning NAV and AMFI on Multi-Cap Classification Rule

In news from the mutual funds space, the markets regulator has tweaked norms for assigning net asset value (NAV) while purchasing units of mutual fund (MF) schemes.

"It has been decided that with respect to purchase of units of MF schemes (except liquid and overnight schemes), closing NAV of the day shall be applicable, on which the funds are available for utilisation irrespective of the size and time of receipt of such application," the regulator said.

Until now, investors who gave a cheque for below Rs 2,00,000 got the same day's NAV, while those putting more got the NAV of the day when the cheque was realised.

The regulator has also asked mutual fund houses to put in place a policy specifying role of several teams engaged in fund management and back office with regard to execution of order and allocation of trade among various schemes.

The regulator has asked asset management companies (AMCs) to put in place a written down policy such as specific activities, role and responsibilities of various teams engaged in fund management, compliance, risk management and back-office, among others, with regard to order placement, execution of order, trade allocation among various schemes and other related matters.

In other news, industry body Association of Mutual Funds in India (AMFI) has said that aligning multi-cap schemes to comply with the new definition could lead to the creation of a bubble in small- and mid-caps.

In a statement to markets regulator, AMFI said that the compulsion to deploy about Rs 260 billion in smallcap stocks and close to Rs 105 billion in midcap stocks in a span of a few months will most likely create a bubble in those two segments. Majority of small-caps and a large number of mid-caps are highly illiquid.

AMFI added that the circular compels MFs to buy stocks in the broader universe at expensive valuations. AMFI also gave a few recommendations such as renaming the existing multi-cap fund category to "flexi-cap", to allow dynamic allocation to all three stock categories.

On September 11, the capital markets regulator issued a circular directing multi-cap schemes to deploy at least 25% each in large-, mid-, and small-caps. At present, such schemes manage Rs 1.47 trillion in assets.

Assuming every fund rebalances, Friday's circular is expected to trigger a move of around Rs 280 billion from largecaps to smallcaps.

Richa Agarwal, lead smallcap analyst at Equitymaster, believes this move would be net positive for select smallcap stocks.

As per Richa, this could be a once in a decade opportunity to get rich from select smallcaps.

CAMS IPO Opens for Subscription

In news from the IPO space, the public offer of Computer Age Management Services' (CAMS) will hit the primary market today.

The firm has set the price band for the issue at Rs 1,229-1,230 per share. The initial public offering (IPO) will be an offer for sale (OFS) of 1,82,46,600 shares by NSE Investments which at the upper limit of the price band suggests an issue size of Rs 22.4 billion.

CAMS claims to be India's largest registrar and transfer agent with a market share of 69.4%, based on mutual funds' average assets under management, as of November 2019.

It offers integrated services for receipt, verification and processing of financial and non-financial transactions for the BFSI (banking, financial services and insurance) sector, largely the mutual fund industry.

How the above IPO sails through remains to be seen. Meanwhile, we will keep you updated on the latest developments from this space. Stay tuned.

Class Action Suits Against HDFC Bank

Moving on to news from the banking sector, US-based Rosen Law Firm and Schall Law Firm have filed class action suits against HDFC Bank alleging misleading public statements and for failing to inform investors about the bank's improper internal controls on vehicle loans.

The lawsuits, filed in the US District Court Eastern District of New York, named outgoing managing director Aditya Puri, CEO-designate Sashidhar Jagdishan, and company secretary Santosh Haldankar as 'individual defendants' and collectively, with the bank, as 'defendants'.

Rosen Law filed the suit on September 14 on behalf of investors who purchased HDFC Bank equity between July 31, 2019 and July 10, 2020.

Rosen had announced it would file such a lawsuit on September 4. Schall Law Firm also announced such filing on September 8, for the same period.

The class action filing on Rosen Law's website says, "throughout the class period, defendants made materially false and misleading statements regarding the bank's business, operational and compliance policies."

The lawsuit pointed out that the HDFC Bank's ADR fell US$ 1.37 per share to close at US$ 47.02 per share on July 13 after it was reported in media that the bank was probing its lending practice in the vehicle financing operations involving the unit's former head Ashok Khanna.

The lawsuit added that investors who had acquired the shares at artificially inflated prices during the class period suffered significant losses and damages, after the revelation.

How this lawsuit settles remain to be seen. Meanwhile, we will keep you updated on all the developments from this space. Stay tuned.

And to know what's moving the Indian stock markets today, check out the most recent share market updates here.

For information on how to pick stocks that have the potential to deliver big returns, download our special report now!

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