Street signs: Debt funds under pressure, diagnostic firms go weak and more

Debt fund returns under pressure

With the Reserve Bank of India (RBI) maintaining a status quo on key policy rates on Friday, fund managers believe investors should lower their return expectations from debt funds as the rate-cutting cycle is nearing its end and potential for capital gains are limited. Those with a higher risk appetite can go up the duration curve. "Given the wide gap between short- and long-maturity bond yields and a stable interest rate outlook, longer maturity bonds look attractive from an accrual standpoint. However, investors in longer maturity bonds/funds should remain cautious of fiscal and inflation risks over the medium term," said Pankaj Pathak, fund manager - fixed income, Quantum Mutual Fund.

Ashley Coutinho

Cold storage, hot stocks

Buying shares of companies that operate in the cold storage space is emerging as a hot theme on Dalal Street. Shares of Blue Star and Voltas, which specialise in cooling technology, have gained in recent weeks. So, have the stock of Snowman Logistics, a cold chain logistics company. “Investors are buying these stocks ahead of the launch of a possible vaccine for Covid-19. Most Covid vaccines are required to be stored in sub-zero temperatures. In theory, it looks like a good trade. However, one doesn’t know yet how the whole vaccine rollout will play out in India and whether these companies will indeed be the beneficiaries,” said an analyst.

Sundar Sethuraman

Diagnostic firms underperform 

Shares of diagnostic companies have been among favourites since March. However, the rapid progress in Covid-19 vaccine development has taken the wind out of the sails for these trade. In the past month, shares of Dr Lal PathLabs, Metropolis Healthcare, and Thyrocare Technologies have fallen or are flat. In comparison, the benchmark Nifty has gained 10 per cent during the same period. Launch of a vaccine will reduce the demand for testing. Also, recently some state governments have imposed stringent caps on prices for some Covid-19 tests. Analysts say investors are assessing how the non-Covid business will play out for these companies going ahead.

Samie Modak