Bonds and mid caps hurt balanced MFs
Market liquidation has reached balanced mutual fund regimes, where investors seek lower volatility from a mixed portfolio of equity and debt securities. Since the start of the year, these plans have produced negative returns of over 21%. According to industry experts, while these plans fell 4 to 5 percentage points less than other equity plans, allocation to mid-cap stocks had a negative impact on their returns. In addition, the debt markets have also experienced a difficult environment as liquidity has tightened, foreign investors withdrawing more than Rs 64,000 crore from debt market investments during the current calendar year . “Yields have soared in long-term debt securities, which has hurt the debt component of these plans,” said an industry expert.
High volatility, low interest
The unusually high volatility leads to a decline in participation in the derivatives market. Nifty’s open interest (OI) at the start of the April series was only 10 million contracts, which analysts say is the lowest in 10 years. In addition, rollovers and OIs in Bank Nifty, the second most traded index after Nifty, are also significantly lower than historical averages. Market players say that the high implied volatility (IV) leads to price anomalies and discourages traders from building huge positions. “Until we see the IVs cool down, we will continue to see low volumes and irregular inventory movements,” said an analyst.
YES Bank not synchronized
YES Bank stocks have plunged 33% in the last four trading sessions, while the Bank Nifty index has gained 18%. Since its March highs of Rs 61, which it hit after restructuring led by the State Bank of India (SBI), the stock has more than halved. Market experts have said that investors should be careful when trading over the counter until the stock finds its “real value”. “YES Bank shares went from 6 rupees to 60 rupees with no fundamental basis. In recent trading sessions, the stock has dropped to a more realistic value. The price trajectory is highly suspicious, and could be in part due to the complications surrounding the locking and expulsion of Nifty. Investors who want to bet on the revival of the bank should wait a few weeks before forging positions, “said a market expert.