MC Inside Edge: Goodwill hunting in Sadbhav Engg, Bears stalk Vodafone but Sheikh stays pat, HNIs take a shine to NALCO

Read about the major deals and all the inner goings-on from Dalal Street.

On HFT radar

Sadbhav Engineering shares plunged 10 percent on Wednesday, just a day after it saw a big spike in volumes. Activity in the stock has been higher than usual since mid-February. State-owned STCI Finance sold around 3.7 million shares over the last three weeks, which was absorbed without any impact on the price, even as sentiment for small caps in general has been on a low ebb. It is among the key small cap holdings of the one-time Man Friday of the mining baron of India, and market chatter is that he and his associates have been active in the stock of late. Two algo trading firms too have stepped up their activity in the stock of late.

Bears on the prowl

Bearish bets on Vodafone Idea are on the rise, looking at the data on the NSE’s securities lending and borrowing (SLB) window. Open positions—an indicator of shares borrowed to short sell—have risen to 26 million shares, and Vodafone is number one on the list, replacing IDFC First Bank, which usually holds that spot. With further equity dilution on the cards because of the fund raising, some pressure can be expected near term. The street is mixed in its outlook on the stock. The fund raising is a positive development, but analysts are unsure if it would be enough to make a meaningful difference to the company’s efforts to regain lost market share. Not too many supporters of the stock exist among fund houses or HNIs, barring the Sheikh in the late Big Bull’s inner circle. He is holding on to his position, betting that the worst is already reflecting in the price and that things can only get better hereon.

Light metal

National Aluminium is seeing a lot of interest from HNIs. Surprising considering that the outlook on aluminium prices is not all that great. Derivatives positions show concentrated bets with nine entities together accounting for around 35 percent of market wide position limit. It is helping that domestic mutual funds too seem convinced about the aluminium story and are willing to play it through National Aluminium rather than Hindalco. Key risks for aluminium prices near term including the unravelling of the electric vehicle hype globally and more capacity coming onstream because of energy prices coming off in Europe and many smelters reopening.

Specialty chemicals

Analysts are divided on specialty chemicals, but HNIs on Dalal Street are betting on a turnaround, starting March quarter. But it is unlikely to be an easy run for the bulls. For one, it remains to be seen if fund managers are willing to pay a premium like in the past. Fears of Chinese chemical firms resuming their dumping in global markets still linger. Two, far too many long suffering investors would be looking to lighten their positions at breakeven levels or even a small profit, given the prolonged underperformance.