SEBI toys with Multicap Funds & More

With a seemingly second wave of coronavirus upon us foretelling a long haul of living with the virus, a totally virtual New York Fashion Week, Jane Fraser becoming the first woman to lead a major Wall Street bank, 2020 seems to be intent on entrenching itself deeper into history books.

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SEBI toys with Multicap funds

You have to give it to SEBI. Just when you thought things are seeming too stable or calm in the markets, they seem to hear you and think aaj kuch toofani karte hain (let’s kick up a storm). This time, the product in limelight were the multicap mutual funds.

Take 1: Since the categorisation of mutual funds into 16 strictly defined categories, multicap funds were the ones riding free. Apart from having to ensure more than 65% in equities, it was the playground for fund managers. In the current scenario, most of the portfolios factor large caps heavily with some exposure to Mid Caps and a namesake dipping of the toes in Small Cap. SEBI came sniffing and decided to leash this category with the mandate of minimum 25% each in large, mid and small cap by Jan 31st.

Take 2: While they snuck up with the idea on a Friday after market hours, the first conclusion everyone drew was “Sell Large Caps, rush into Mid and Small Caps”, with analysts going far enough to expect as much as Rs. 40,000 Crores moving from Large Cap to Mid and Small. Realising the possible storm spilling out of the proverbial tea cup, SEBI issued a clarification offering multiple out options to funds – switch option to investors, merger with Large Cap or conversion to Large & Mid. No wonder, most experts are now advising existing investors to hold on to their horses and their Sell button to rather than wait and watch.

The many mood swings of Toyota

This week Toyota decided enough of Tesla stealing the show globally. Atleast in India, the least they could do was throw a tantrum, retract it and then live happily after in some borrowed glory.

“We Don’t Want You” taxes: While we have everything settled in for a welcoming party to MNCs looking for manufacturing hubs, Toyota kicked up a storm. Shekar Vishwanathan, vice chairman of Toyota Kirloskar Motor (the local Indian arm) pointed out two problems. High levies made scaling up unreasonable and exorbitant consumer taxation meant demand was not picking up either. Getting a bit emotional, he did mention that the company felt unwanted in India. Hence, while they weren’t pulling the plug, they weren’t looking to infuse any growth funds to expand into India either.

Reverse Gear: Considering the government priority on “Make in India” and the fact that most people are aware Toyota is not Chinese, this wasn’t a very acceptable statement. After whatever backroom dealings, there was a Twitter backing off from this stance by Toyota. So much so, that they announced a plan to invest Rs. 2000 Crore in India on electric cars domestically and abroad. Enough drama to give competition to Ekta Kapoor serials? 

The Oracle of Tik Tok

Did you ever imagine that the Tik Tok story could be even more entertaining than the content on Tik Tok? In fact, news about Tik Tok has become it’s own biggest influencer.

What’s tik tok-ing? This whole saga started with Trump releasing an executive order that Tik Tok could operate in the US only if it agreed to be bought out by an American player. This order came to light as Microsoft called shotgun to going first. As the battle heated up, names kept adding be it Twitter or Walmart.

The grand reveal: News came in this week that Oracle was stepping in as the knight in shining armour. Details are still blurred and hazy. This article from NYT calls out that Donald Trump has raised concern over Byte Dance still being the majority owner with Oracle being more of a “technology partner”. Other changes include a US headquarter, American management and listing in US markets. However, a bone of contention remains Tik Tok holding on to their algorithm, especially of their famed “For You” page.

IN SNIPPETS

Dr. Reddys’ vies with Serum for the corona vaccine: Dr Reddy’s has thrown it’s hat in the ring and inked a deal to buy 100 million doses of the Sputnik V from the Russian sovereign wealth fund. Dr. Reddy’s will be doing clinical trials for the drug and if all goes well is expected to be ready for deliveries in late 2020. Feeling the FOMO, Zydus and four other companies are said to be in the process of signing their own deals for distribution of Sputnik V. Although 1 in 7 volunteers have reported mild side effects in the current trials where 42 days post vaccine have been observed.

Shapoorji Pallonji misses payment yet again to group company: The SP group on Wednesday said it had missed a deadline for repayment to group company Sterling & Wilson. The family has repaid only Rs. 103 Crores of the Rs. 1000 Crores owed by this month from a total of Rs. 2644 Crores due. In the background, the SP and Tatas continue to lock horns. Tata blocks attempts of the group to raise funds against Tata Sons shares. SP slaps them a notice against this. Messy divorces often lead to long drawn battles.

BIS toy certification norms from 2021: With the objective of limiting Chinese influence in the backdrop, the Centre has enforced Bureau of Indian Standards or BIS on the toy market in India. This is a slight improvement from the earlier September 1 deadline that the government has come up with. Considering only 2 Indian manufacturers had what it takes and 81 are in queue for certification, the extension might make the move more doable.

Spring cleaning for Kraft Heinz: As part of business restructuring, Kraft Heinz has unveiled a plan to cut $2 Billion in costs by 2024. The company’s move of selling it’s $3.2 Billion cheese division to Lactalis that’s making news. But, this is really part of the almost 1100 products that KH has trimmed from it’s portfolio.

ECB lends a helping hand to European banks: European Central Bank continued it’s efforts to drive stimulus through regulation in corona-ravaged Europe. European banks will be allowed to tweak their leverage ratio, helping to give out more loans with less capital on hand. This is the fourth such regulation loosening as a part of stimulus efforts this year.

MARKET PULSE

Looking at the numbers above, the only place of action seems to be Mid Caps jumping for joy at the hara-kiri created by SEBI. For the rest, the one word that sums up the movement is really, boring!

But, beyond the numbers, the IPO market seems to be on-track, be it in India or in the US. While India saw Happiest Minds list at a 123% premium , while Snowflake raised $3 billion as it listed on NYSE. Ironically, both companies are software providers in a broad sense. While Snowflake is a cloud computing firm, Happiest Minds is more of a digital servicing firm.

On the other hand, like everything else coronavirus, OPEC+ is staring at more intense contractions of oil demand and looking at better member compliance on the productions cuts.

WILD CARD

Fascinated by space travel and drool at the idea of going up in the air with SpaceX? A U.S. production company called Space Hero is planning a reality show where the grand prize is an all-expenses paid trip to International Space Station in 2023! While Tom Cruise beat them to it by signing up to work with NASA on filming at the ISS, this show intends to enable a commoner to fulfil a space dream. Are you up for it?

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