MC Inside Edge: Theme, theme, which theme do you want, Solar but not so hot, Cementing a place in future 

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

Thematic is actually the new theme

Mutual fund is a tightly regulated business with most of its aspects including fund launch, fees, and scheme composition being subjected to very detailed and granular regulatory framework. For instance, the fund categories have been clearly laid down and there are restrictions on the number of schemes that each fund house can have within each of the categories. Fund houses, however, have found an interesting way around and are queueing up to launch a number of thematic funds. While one may feel that the trigger is the buoyancy in the stock markets and genuine investor interest, industry participants say that a big reason is “absence of restrictions” in the number of schemes a fund house can launch in the thematic category. But with so many schemes and the segment getting crowded, will the investor finally benefit?

The SME IPO saga continues

SME IPOs are bound to make news every time an offer hits the market. Unusually high levels of oversubscription and the ensuing huge listing gains has become the norm rather than the exception – a trend that has caught the regulator’s attention as well. The euphoria is such that any SME IPO story gets sold even though there are enough red flags for the investors. Recently, an SME IPO from a company in the solar energy segment hit the market and got subscribed over 850 times. The bulk of the revenue of the company comes from importing solar panels and invertors from China and then selling it in the Indian market. Solar is a theme that has many takers and hence the oversubscription was not a surprise. However, many on the street seem to have forgotten that the government has put in place many restrictions on such imports and the barriers have come into effect from April 1. Simply put, the company’s biggest source of revenue got hit. Proper due diligence does not really hurt!

Cementing a strong foundation

India Cements seems to be attracting a lot of attention of late. Traders are saying that the counter is seeing unusually high trade size – average number of shares per transaction – on some days in the recent past, which hints at a significant uptick in the trading interest. On Friday, nearly 6500 trades were struck in the counter, which was significantly higher than the average number of trades over the last few days – it was mostly in the range of 1000 to 2500. On the derivatives side, there was a substantial 19 percent unwinding in futures, equating to around 1700 lots. Typically, the counter sees transactions of approximately 400 lots per day. Additionally, there was unwinding in 19 percent of call options. The stock has been under pressure from a prolonged short buildup and the recent unwinding may signal a shift in investor sentiment towards the stock.