Mixed move­ments

Money Times - - Bazar.com -

The mar­ket moved both ways last week in­di­cat­ing that the sen­ti­ment is made up of mixed feel­ings. As far as fun­da­men­tals and guid­ance are con­cerned, their har­vest is over; it’s now the play of sen­ti­ment alone. For a change, even the head­lines have changed from pol­i­tics to triple ta­laak giv­ing a much needed breather to read­ers. In­vestors are eval­u­at­ing the un­fold­ing of fun­da­men­tals in 2016, 2019 and beyond. The way the polls swing dur­ing the as­sem­bly elec­tions in M.P., Gu­jarat, Kar­nataka and Ra­jasthan is very im­por­tant as it will be con­sid­ered to be the lit­mus test for the BJP in par­tic­u­lar and the NDA in gen­eral. Lit­tle won­der, Amit Shah, Pres­i­dent of BJP, is more ac­tive and more in the news than Prime Min­is­ter Naren­dra Modi (NaMo).

The In­fosys de­ba­cle at Sikka’s res­ig­na­tion is a les­son for in­vestors as to what can hap­pen to a mar­ket leader if the founder is pos­ses­sive about his com­pany even if he is re­duced to a mi­nor­ity share­holder. It is be­lieved that the board­room bat­tle-lines are drawn and the In­fosys founder, Narayana Murthy, is meeting all seg­ments of stake­hold­ers to seek their sup­port.

The ero­sion in In­fosys’ mar­ket cap is con­sid­ered the worst ever and has led to a jump in liq­uid as­sets to mar­ket cap ra­tio of 19.5%. Dur­ing its golden days, it never ex­ceeded 5% to 7%. Such a high liq­uid to mar­ket cap ra­tio will af­fect in­vestors’ in­ter­est de­spite the an­nounce­ment of an at­trac­tive buy-back. Well, In­fosys can seek con­so­la­tion in Wipro’s liq­uid to mar­ket cap ra­tio at 26%. But then, both their sizes and busi­ness out­looks are in­com­pa­ra­ble.

SEBI as a proac­tive reg­u­la­tor is dis­sect­ing the In­fosys trans­ac­tions to de­tect any foul play. In its bid to lighten the grip on shell com­pa­nies, the Reg­u­la­tor is seek­ing strict dis­clo­sures and com­pli­ance. It now wants to link your Aad­har card to your de­mat ac­counts and has set the dead­line at 31 De­cem­ber 2017. This will, in a big way, unearth un­ac­counted sums parked in se­cu­ri­ties and may ex­pose money laun­der­ing in the stock mar­ket.

Eq­uity mar­kets in USA and the West seem to be los­ing pa­tience with Trump’s poli­cies. In the wake of Banon’s de­par­ture, mar­kets gave up what­ever lit­tle op­ti­mism they shared. This may raise bear­ish risks on all risky as­sets in gen­eral. Peo­ple like Colin and White House Chief of Staff, John Kelly, keep the hope alive that there are enough adults in Trump’s Oval of­fice. The world closely ob­serves every sin­gle move out there.

At home, the gov­ern­ment is once again mak­ing ef­forts to tackle the NPA issue and give teeth to the in­sol­vency and bank­ruptcy laws. Sooner than later, the gov­ern­ment may come out with a scheme of merger of PSU banks in a bid to

con­sol­i­date their syn­er­gies. Rather than the gov­ern­ment push­ing such pro­pos­als down the throat of PSU banks, it would have been pru­dent for the board at each bank do some think­ing.

The Nifty is set to be re­con­sti­tuted if the re­vi­sion in guide­lines gov­ern­ing such re­con­sti­tu­tion is to go by. In­dia In­dex Ser­vice and Prod­ucts, a NSE group firm, is work­ing on it. Such newly de­fined guide­lines will be made ap­pli­ca­ble from Septem­ber 2017. Ac­cord­ing to the new guide­lines, the Nifty Fifty shall come from the Nifty 100. For in­clu­sion in Nifty, the se­cu­rity should have traded at an av­er­age im­pact cost of 0.5% or less dur­ing the last six months. Com­pa­nies will be in­cluded in the in­dex if their free float mar­ket cap is 1.5 times the free float mar­ket cap of the small­est con­stituent in the re­spec­tive in­dex.

Changes are al­ways wel­come on the bourses and more so if they come dur­ing the “Shree Ganesh” and “Michami Dukkadam” days.

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