With the redemption of $20 billion FCNR(B) coming up between September and November, market people believe the Reserve Bank of India (RBI) might allow the rupee to appreciate in the run-up. The reason: While the central bank gave the rupee debt to banks at 3.5 per cent, it bought forward contracts for the same at about seven per cent. This means RBI would have to take the hit on the difference, when the redemptions occur.
A stronger rupee, when redemptions begin, would reduce the blow, even if there is some depreciation due to outflows, say experts. Banks had raised a total of $34 billion in the September-November 2013 period using a discounted swap window opened by RBI to shore up reserves and protect the vulnerable rupee. Around $27 billion came through FCNR(B) deposits.
Will leveraged bets on Advanced Enzyme IPO pay off?
About Rs 35,000 crore worth of bets are riding on Advanced Enzyme Technologies' initial public offering (IPO). Will they pay off for investors? According to investment banking sources, shares of the company will have to list at a premium of at least 40 per cent if these high net worth investors (HNI) have to make gains. Factoring in the borrowing cost, the breakeven for these investors works out to Rs 1,200 compared to the issue price of Rs 896. The HNI portion of the IPO was subscribed a whopping 394 times.
Grey market (a market where a product is bought and sold outside of the manufacturer's authorised trading channels) players peg the stock to list at 35 per cent premium.
Funds go slow on investments
As the Sensex closes in at 28,000 points again, mutual funds (MFs)' contribution to this rise has been muted unlike in November 2014, when the index had hit 28,000 points for the first time. At that time, MFs had invested about Rs 25,000 crore in the previous six months. However, this time, they have invested only Rs 9,562 crore in the past six months.
Market experts believe there are two reasons. First, some fund managers have turned cautious, as they believe the Brexit impact is yet to be fully priced in. Second, the number of sellers has come down significantly and fund managers can't buy stocks at reasonable prices.
