MC Inside Edge: Desi Soros doubles down on PSUs, brakes off in Rane, Tata Chem bulls in a spot, local MFs’ dilemma

markets

Circuit ‘brake’r

The Rane Brake Lining stock is back in focus after a decent fourth quarter showing and a 30-rupee dividend. There were only buyers for the stock at the upper end of the 20 percent intra-day circuit filter. Early birds in the stock could be trying to whip up some action. Nothing else explains 90 percent (18 lakh shares) of the free float changing hands on Friday. This for a stock where daily trading volumes are usually in the range of 10,000-20,000 shares.

The stock had already rallied 30 percent between mid-March and early May. High frequency trading firms jumping into the act on Friday seems to have given it the power for a vertical take-off. Question is: can the stock get rerated? Rane Brake was flavour of the season during the small cap rally in 2016 and 2017. Though its operating performance saw steady improvement between FY15 and FY19, the stock fell out of favour long before earnings peaked.

Desi backs Sarkari

Many big ticket traders and fund managers are in a dilemma over PSU stocks. For one, prices have run up, and two, there is chatter that the government may be looking at a meaty divestment plan in the upcoming Budget in July. These seem to be of little concern to Desi Soros, who right now is having a dream run both in terms of portfolio performance and inflows. He is learnt to be a consistent buyer in PSU stocks, with a watchful eye on the exit. After all, Soros is known as much for his stock picking skills as his Houdini act.

With soda (ash) and ice

Short positions in Tata Chemicals shares in NSE’s SLB window have steadily climbed to around 2.6 million shares. Bulls appear to be in a spot of bother after the company’s disappointing fourth quarter numbers. The Tata Sons IPO chatter had sent the stock soaring to a record high in early March. An equally swift correction followed after it became evident that the IPO was unlikely to materialize. Some clung on to their positions, hoping the company would repeat the operating performance of Q4 2023. A growing view among analysts now is that soda ash prices will be under pressure in the foreseeable future. In the meantime, bears appear to be moving in for the kill. An interesting tussle appears to be on the cards.

Circular argument

On the face of it, domestic mutual funds appear to be most convinced about the India growth story, looking at their net purchase figures every day. Speak to fund managers and a different picture emerges. They are struggling with deploying inflows as there are not enough good ideas available at reasonable prices. But they have no choice other than to put the money to work. And this is triggering a self-fulfilling prophecy. Because mutual funds are buying in face of steady FII selling, retail investors feel fund managers know something that the rest of the market does not. As mutual funds put incremental money into their key holdings, the net asset value of the schemes starts inching higher. This is attracting more SIP money.

In private, fund managers say there is little chance of making good returns in the medium term by buying at current prices. In fact, retail investors should start looking at opportunistic lumpsum investments they say.