Can anyone help with performance of liquid funds on rising interest rates and tighter liquidity scenarios? My wholly unsubstantiated feeling is that, since most of them are supposed to do 90/120/180 day lending, they stand to benefit from higher rates as well money tightening scenarios.
Is that how it is, or I’ve got it inverted i.e. they perform badly in increasing rate scenarios?
No, all funds holding shorter duration bonds will benefit, as new bonds are issued at higher interest rates, and longer duration bonds will give negative returns for some time.
Here is a screenshot from Value Research Online https://www.valueresearchonline.com/funds/
Here is a detailed view https://www.valueresearchonline.com/funds/fund-category/?prim_cat=debt
The longer the duration, the longer the interest rate effect.
Due to an inverse relationship between the Interest rate & bond’s price, a rise in the Interest rate leads to a fall in the Bond’s Price.
Basic relationship -
However, the price fall for a short-term bond is less than the price fall for a long-term bond when interest rates rise.
For instance, comparison between 1-yr and 10-yr bond -
Although both types of bonds lose value on an absolute basis, the short-term bond performs better than a long-term bond as it loses less.
Thank you but what do Liquid Funds do? And can I assume that they’d make a little more, now that rates are more?
Hi, please suggest some books to understand different industries or helpful in industry analysis…
Liquid Funds invest in short tenor debt such as CDs, CPs, short tenured G-Secs, T-Bills and call market. You are right, they would earn more in a rising rate scenario since fresh inflows and maturing instruments will get reinvested at higher rates than before.
Michael Porter’s Competitive Strategy is a good book to understand how to analyze industries.
In general, what do you think about the bearing industry? Is it a good investment for the long term based on current views?
Anybody know the procedure to get shares back from IEPF ?
Apparently the site is not that helpful.
Does anyone know how a Rights Issue works? I mean, I know the facts around how it works. But if you’ve ever subscribed to a Rights Issue, I want to understand how it works real-time; more specifically the details around:
I know it’s a lot of question. But any explanation here would help. Thank you.
I participated in Minda Industries Right issue in 2020. I also had a lot of questions at that time on process,so I mailed them. They explained everything over mail communication. Attaching some screenshots. Hope it will help.
I have subscribed to some in the recent past.
Any Rights Issue, from a certain time after approval date, till some time before record date for allotment, an instrument called “Rights Entitlement” are created with its own ISIN, that is available for trading, and can be purchased. In some cases trading is active.
The amount of “Rights Entitlement” created is the total amount of shares available for Rights Issue. The trades are all delivery based and hence who ever owns the Rights Entitlement as of Record date can subscribe to the Rights Issue
Yes, both the Rights Entitlement and the shares upon subscription to the Right Issue are credited to the demat. You get mails from the relevant Depository with details like this
They will be applied for listing by the company and once they are, they are admitted for trading…typical not more than a month, iirc.
There will be theoretical price to the rights based on the closing price, cum-Rights, on Record date. In my observation/experience, the ex-Rights is higher than its theoretical price; but I have also seen it go lower in some cases. While it depends on many qualitative factors, the purpose of Rights plays a big role (and to a good degree independent of other factors). So if it’s for specific purposes that are seen to increase value, the price may open at a higher price than theoretical price. However if it is because the Promoters want to save a failing business and seeking Rights, it opens lower…but these are very anecdotal and I may be just trying to put some reasoning where none may exist.
You can create a tax loss to reduce your tax burden, by buying entitlements and selling your pre-rights holding soon after the record date when the share price falls (Rights Issue are always priced lower than market price). And you may work to have the same holding as earlier thanks to shares you get via entitlement. The minor flip side is to hold it for a year etc (you likely know the works)
If (a) there is a large gap between the share price when Rights is priced and the Rights Issue, (b) Rights Issue is materially big, and (c) say you think the share price is quoting far lower than intrinsic value at that time, then there is merit in evaluating purchase of more entitlements as you lower your average cost, with the assumptions that odds will be high that the ex-Rights will be higher than the theoretical ex-Rights.
An instructive live example is the Rights Issue of Sundaram Finance Holdings Ltd, which priced its Rights at 50, ratio of 23 offered for every 49 held. The share price was quoting at around mid 70s.
You may learn more here - SFHL Link Section VII, page 113 of the LoF gives the terms and should be able to answer all your questions.
Finally, for any application related doubts, contact the CS of the company. They are tasked to see Rights are fully taken up and will go the extra mile to help
I recent read some thread in VP or somewhere else, which I could not locate, which said tax loss can’t be harvested for “buyback” or “bonus shares” if the shares are bought within 3 months of corporate action. Even if the shares are bought earlier than that, there’s a limit of how much you can harvest tax loss on these stocks.
It may be a good idea to locate it to avoid a speculative discussion!
Shares issued under Rights Issue are none of the above. AFAIK there is a new rule to avoid creating of tax losses via Bonus Stripping. But as always I am no tax advisor.
Could you provide more info around
More info would help to possibly help with analysis.
I’ll delete my post in 48 hours if I or any one else could not provide any reference.
I have a question on emargin buying… i bought some stocks on hdfcsecurities emargin and as per process i m supposed to get sms or email with link to pledge the stocks… i hav done it in past and it worked ok… but now recent one hasnt worked… i didnt get pledge request sms or email to pledge the stocks with in T+4 days nor on last day… and the next day they got squared off… now how can we ourselves pledge or what we can do if we didnt receive any sms or mail with link to pledge…pls let me know if anyone aware of process…
I recently went through the annual report of Eveready Industries and found that they have 1060.81 Lakhs in the Balance sheet.
Why is this amount not appearing as an exceptional amount in the PnL statement as a loss
Please let me know in case my understanding is incorrect
I think what you are asking is that why the Rs 1060.81 lakh impairment is not appearing under Exceptional Item.
It need not. From the Particulars the ‘impairment’ seems to of fiscal benefit receivable from Assam Plant, receivable from supplier and/or ‘etc’ 
. So the corresponding entry of Rs 10.6081 cr could be adjusted against any of those items and may not be separately seen as it would get added up with other entries in that account head.
I want to invest in companies that are highly leveraged as the leverage can generates higher returns (of course it can led to higher losses also). But how can I identify those companies which are highly leveraged but at the same time can effectively use that debt to generate higher returns than cost of the capital. How can I filter those companies. Is there any specific criteria. Should I look for debt to equity ratio equal or greater than 1 and interest coverage ratio > 3 and ROCE consistently > 20%. Or I should follow some other approach.
Please share your comments and suggestions.
