MC Inside Edge: Tech biggie gives local MFs heartburn, Godrej big bulls stay put, SME turns 10-bagger in two months, BSE’s clearing woes

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

Timing it right

It is impossible to catch the top or bottom as the stock market adage goes, but Tata Sons seems to have come pretty close. From the day it sold a piece of its stake in TCS to institutional investors in March at Rs 4001 apiece through a block deal, the stock price has rarely topped that level. This is causing heartburn to some domestic mutual funds which had enthusiastically participated in the block deal. Fund houses significantly trimmed their exposure to the stock in April, but those with schemes dedicatedly investing in IT/technology have little choice but to buy some more at every decline. They did that this week, but the price is not sustaining above the Rs 4000 mark.

Land bank woes

Godrej Industries shares continue to struggle. A section of investors is unhappy that it did not clearly spell out the deal with Godrej Boyce over development of the Godrej group's land bank. Some of the big investors in the stock are unfazed though. “The details will never be known because the land rests with the unlisted company and they are not obliged to make any disclosure,” an HNI with a sizeable holding in Godrej Industries told Short Call. The HNI’s view is that it is safe to assume that the rights of the land bank would have been equitably settled considering that some of the most respected investor bankers, (one of them a commercial banker as well), the two Ks, were part of the negotiations.

Oasis in uncertain market

Shares of Owais Metal and Energy resumed their gravity defying run on Friday after hitting the lower end of the circuit filter just a day earlier. Thanks to a low free float, the returns has been astounding. The stock listed at more than thrice its IPO price of Rs 87 in early March, and then went on to top Rs 1000 in just two months. Hard to tell if this is a case of the IPO having been horribly mispriced or a regular pump-and-dump operation in play. Chatter is that all the float has been cornered, as is the case with most of the SME names. A secretive AIF holding a sizeable stake in this stock is among the prominent anchor investors in many SME IPOs and seems to have a knack for spotting winners.

Outreach campaign

The BSE is heard to be reaching out to custodial participants (CPs), trying to persuade them to switch to its clearing corporation ICCL. But the bourse is not having much luck on that front. While it has managed to grow its derivatives volumes exponentially, CPs don’t see any merit in shifting because the charges are the same. But the bigger hurdle is the SEBI rule that CPs can sign up with only one clearing corporation. That is because inter-operability across both clearing houses does away with the need for CPs to sign up with more than one clearing house. BSE’s challenge right now is that it is hurting from a higher SEBI turnover fee as well as the clearing charges it has to pay for the trades cleared by the NSE-owned NSCCL. NSE too is seeing its SEBI turnover fee rising faster than premium turnover, but the charges it pays to NCCL ultimately reflects in its consolidated financials.