Well, valuation is the ultimate king in equity market. Market may support insanity in the short term but in the long run valuations always revert to the sector mean for majority of the stocks. The stocks that trade above the sector mean typically have something special about them such as extraordinary growth potential, very high quality management with outstanding and consistent track record of execution and some kind of moat.
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Below is MSCI index rejig from this news article >MSCI Feb review: NMDC, PNB added to Global Standard Index. Here are the other changes - BusinessToday
- MSCI Domestic Indexes:
- Large-cap additions: Tata Motors, Macrotech Developers
- Mid-cap additions: Punjab National Bank, Canara Bank**
- Small-cap to mid-cap upgrades: BHEL, Persistent Systems, MRF, Suzlon Energy, Cummins India** Kirloskar, Embassy Office Park REIT**
- MSCI Emerging Markets Small Cap Index:
- Indian Renewable Energy Development Agency added
- GMR Airports Infra moved to mid-cap
- Deletions: Prestige Estates Project, Rail Vikas Nigam
- MSCI India Domestic Large Cap Index:
- Additions: Trent, Tata Consumer Products, Power Finance, REC, Tata Power, Macrotech Developers, Tata Motors
- MSCI India Domestic Small Cap Index:
- Additions: IREDA, Vedant Fashions, Honasa Consumer, Cello World, Swan Energy, Paisalo Digital, Rattanindia Power, ITD Cementation India, Jaiprakash Associates, KPI Green Energy
- Deletions: Persistent Systems, Suzlon Energy, Cummins India Kirloskar, MRF, BHEL, Oberoi Realty, Solar Industries India, Prestige Estates Project, Oracle Financial Services Software, L&T Technology Services
A news article here >MSCI Rejig: India May See $1 Billion Inflow; Mamaearth, IREDA May Get Added To Small-Cap Index
says IREDA’s expected inflow is USD 12 Mil.
The MSCI index rejig will come into effect from market close on February 29.
On February 8, its aid it has received approval from the Reserve Bank of India (RBI) to set up a wholly owned subsidiary in the International Financial Services Centre (IFSC) situated in GIFT City in Gujarat. (This might be only a good PR)
With these news , What may change to the story of IREDA, what could be timeline one can look at if one is to add IREDA ?
D-Invested.
All these developments notwithstanding, the best time to add Ireda would be when it corrects another 30-50% from here (it has already corrected 25% from the top). If you are buying a financial services company at 7-8x price to book and hoping to make returns you need to be extremely lucky.
Bajaj Fin, a gold standard in NBFC space, was trading at 10 p/b in October 2021. Stock has since been in a time correction giving negative return. Same goes for Kotak or HDFC bank. Nothing wrong with their fundamentals or earning performances. It’s just that their stocks ended up on wrong side of the valuations.
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so i was watching development through out day today…IREDA changed course but it didnt offer any chance to add…it simply shot to UC …what can we read in this sudden change of course ?
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Last 3 days , there were no buyers. Today morning again no buyers. Today afternoon , there are no sellers- only buyers
so everybody was on wait and watch mood.
My take is that, some PSU stocks had very bad Q3- so all were beaten down - both good and bad.
Now those bad guys recovered back in spite of bad Q3
market perhaps realised that the long term PSU story is in tact discounting Mr Mrodi’s return and hence policy continuance. All said and done , IREDA had a very good Q3 and there is no reason why it should not bounce back.
in my view, the volatility in PSU stocks may continue until the election results are out. and Those who are involved in trading need to exercise caution.
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At the end of the day it is a lender, why should it be 5x its networth when a bank like HDFC trades at half that valuation. I know there is a difference between NBFC and a bank…but still…valuations are obscene for a PSU lender.
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Possibly more of momentum and sentimental trading, and less driven by valuations. We can either ride the momentum, ofcourse, with caution, or if the model does not fit to our investment style, then stay away…
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So retail investors are absorbing all this sell-off from people much smarter than most of us?
Fact ?
Exactly. But currently everyone in the market is along for a ride ignoring valuations, fundamentals, common sense… let the party continue.
From my observation, small retail investors usually exhibit two key behaviors.
1- Chasing momentum, buying the stocks at their peak valuations
2- Buying stocks when they massively correct from their insane valuations
Sometimes 2 is often a direct result of 1.
So no wonder you see a massive surge in retail ownerships like Yes bank and I’m sure we’ll see something similar in Paytm in the next couple of quarters.
Don’t forget that Smallcap Mutual funds and Index funds are also retail. They have to keep buying.
They are institutional investors and their shareholding is reported in DII category. Retail investors is general public.
Yes I know that 
. My point is that ignore the funds which are buying due to it being part of an Index, or part of the PSU sector (PSU theme funds). People are doing SIP/lumpsum in those funds in heavy number, and the fund manager has no other option but to buy. They have already crossed allocation in TREPS, free cash etc and they will need to continue buying the company.
Look at HNI’s, Ace investors, FII in smallcaps.
Shocking indeed. Also may I ask which website UI is this?
Trendlyne i guess
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It is Rupeevest website.
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@varunkbhat got it right.
Thanks @varunkbhat @Mohit_baid
Looks like SBI PSU Fund absorbed the selling.
Also IREDA got included to MSCI Smallcap Index India. That could further support the stock price through foreign fund inflows, as well others buying considering that.
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Pls take a look at below excel data.
it seems,SBI didnt absorb, it added merely 5% of total they all sold in january.
Combined share count of ~12 crore in November to ~6 crore in January…they sold about 50% if we consider them as a group.
In order to know where this 6 crore shares went.We may only know after analysing recent bulk deals/data in February, if at all we can.
| Diff. | January | Diff. | December | November | ||
|---|---|---|---|---|---|---|
| Nippon India Small Cap Fund(G) | Samir Rachh | 0 | 7031100 | -1669155 | 7031100 | 8700255 |
| SBI Banking & Financial Services Fund-Reg(G) | Milind Agrawal | 0 | 5077940 | -5370039 | 5077940 | 10447979 |
| HDFC Business Cycle Fund-Reg(G) | Rahul Baijal | 0 | 5021685 | 0 | 5021685 | 5021685 |
| Nippon India Value Fund(G) | Dhrumil Shah | -1200000 | 4966910 | -6000000 | 6166910 | 12166910 |
| Aditya Birla SL PSU Equity Fund-Reg(G) | Dhaval Gala | -500000 | 4924800 | -3950000 | 5424800 | 9374800 |
| HDFC Multi Cap Fund-Reg(G) | Gopal Agrawal | 0 | 4687400 | 0 | 4687400 | 4687400 |
| SBI PSU Fund-Reg(G) | Richard Dsouza | 3200000 | 3200000 | 0 | 0 | 0 |
| DSP Equity Opportunities Fund-Reg(G) | Rohit Singhania | 0 | 2707100 | 0 | 2707100 | 2707100 |
| Kotak Flexicap Fund(G) | Harsha Upadhyaya | 0 | 2466980 | -624408 | 2466980 | 3091388 |
| Kotak Equity Opp Fund(G) | Harsha Upadhyaya | 0 | 2466980 | -374642 | 2466980 | 2841622 |
| ICICI Pru Midcap Fund(G) | Lalit Kumar | -160000 | 2345753 | -2182107 | 2505753 | 4687860 |
| UTI Banking and Financial Services Fund-Reg(G) | Preethi R S | 0 | 2343930 | -2343930 | 2343930 | 4687860 |
| ICICI Pru PSU Equity Fund-Reg(G) | Mittul Kalawadia | 0 | 2343700 | -2343700 | 2343700 | 4687400 |
| Baroda BNP Paribas Large & Mid Cap Fund-Reg(G) | Sanjay Chawla | -363120 | 2200000 | -41725 | 2563120 | 2604845 |
| DSP ELSS Tax Saver Fund-Reg(G) | Rohit Singhania | -1771460 | 1771460 | 0 | 3542920 | 3542920 |
| LIC MF Large & Midcap Fund-Reg(G) | Yogesh Patil | -579757 | 1562620 | -982863 | 2142377 | 3125240 |
| Bandhan Small Cap Fund-Reg(G) | Manish Gunwani | -420000 | 1173700 | -1188150 | 1593700 | 2781850 |
| Nippon India Banking & Financial Services Fund(G) | Vinay Sharma | 0 | 1172080 | 0 | 1172080 | 1172080 |
| Bandhan Financial Services Fund-Reg(G) | Sumit Agrawal | 0 | 1172080 | -1172080 | 1172080 | 2344160 |
| Sundaram Multi Cap Fund(G) | Sudhir Kedia | -69977 | 1036243 | -425183 | 1106220 | 1531403 |
| Nippon India Power & Infra Fund(G) | Sanjay Doshi | -1000000 | 1000000 | -1505905 | 2000000 | 3505905 |
| Kotak Multicap Fund-Reg(G) | Harsha Upadhyaya | -822250 | 822250 | 0 | 1644500 | 1644500 |
| Kotak ELSS Tax Saver Fund(G) | Harsha Upadhyaya | 0 | 822020 | 0 | 822020 | 822020 |
| WOC Mid Cap Fund-Reg(G) | Ramesh Mantri | 0 | 819260 | -818800 | 819260 | 1638060 |
| Sundaram Mid Cap Fund-Reg(G) | S. Bharath | -21890 | 703110 | -1015800 | 725000 | 1740800 |
| WOC Multi Cap Fund-Reg(G) | Ramesh Mantri | 0 | 460200 | -459800 | 460200 | 920000 |
| Kotak India EQ Contra Fund(G) | Shibani Kurian | -200000 | 294960 | -49950 | 494960 | 544910 |
| Kotak Business Cycle Fund-Reg(G) | Harish Bihani | -287730 | 287730 | 0 | 575460 | 575460 |
| Kotak Pioneer Fund-Reg(G) | Harish Bihani | -287730 | 287730 | 0 | 575460 | 575460 |
| Baroda BNP Paribas Banking and Fin Serv Fund-Reg(G) | Sandeep Jain | 0 | 281060 | -281060 | 281060 | 562120 |
| WOC Large Cap Fund-Reg(G) | Ramesh Mantri | 0 | 197220 | -197000 | 197220 | 394220 |
| Kotak Banking & Financial Services Fund-Reg(G) | Shibani Kurian | -164000 | 164900 | -37462 | 328900 | 366362 |
| Sundaram Infra Advantage Fund(G) | Ashish Agarwal | 0 | 164000 | -190525 | 164000 | 354525 |
| Kotak Infra & Eco Reform Fund(G) | Nalin Rasik Bhatt | 0 | 137364 | 0 | 137364 | 137364 |
| WOC ELSS Tax Saver Fund-Reg(G) | Ramesh Mantri | 0 | 86580 | -86380 | 86580 | 172960 |
| Quantum Small Cap Fund-Reg(G) | Chirag Mehta | 0 | 62247 | 41699 | 62247 | 20548 |
| Shriram Flexi Cap Fund-Reg(G) | Deepak Ramaraju | 0 | 33600 | 33600 | 33600 | 0 |
| Shriram ELSS Tax Saver Fund-Reg(G) | Deepak Ramaraju | 15000 | 15000 | 0 | 0 | 0 |
| LIC MF Banking & Financial Services Fund-Reg(G) | Jaiprakash Toshniwal | 0 | 0 | -23961 | 0 | 23961 |
| Mahindra Manulife Balanced Advantage Fund-Reg(G) | Manish Lodha | 0 | 0 | -872175 | 0 | 872175 |
| Mahindra Manulife Multi Cap Fund-Reg(G) | Manish Lodha | 0 | 0 | -3526323 | 0 | 3526323 |
| Mahindra Manulife Aggressive Hybrid Fund-Reg(G) | Fatema Pacha | 0 | 0 | -41725 | 0 | 41725 |
| Kotak Balanced Advantage Fund-Reg(G) | Rohit Tandon | 0 | 0 | -624408 | 0 | 624408 |
| Kotak Debt Hybrid Fund(G) | Devender Singhal | 0 | 0 | -437080 | 0 | 437080 |
| Kotak Equity Savings Fund(G) | Devender Singhal | 0 | 0 | -999051 | 0 | 999051 |
| Mahindra Manulife Small Cap Fund-Reg(G) | Abhinav Khandelwal | 0 | 0 | -4198582 | 0 | 4198582 |
| Baroda BNP Paribas Value Fund-Reg(G) | Shiv Chanani | 0 | 0 | -333832 | 0 | 333832 |
| Baroda BNP Paribas Small Cap Fund-Reg(G) | Shiv Chanani | 0 | 0 | -417290 | 0 | 417290 |
| Baroda BNP Paribas Equity Savings Fund-Reg(G) | Pratish Krishnan | 0 | 0 | -62591 | 0 | 62591 |
| Baroda BNP Paribas Balanced Advantage Fund-Reg(G) | Sanjay Chawla | 0 | 0 | -417290 | 0 | 417290 |
| Baroda BNP Paribas Conservative Hybrid Fund-Reg(G) | Pratish Krishnan | 0 | 0 | -125183 | 0 | 125183 |
| LIC MF Small Cap Fund(G) | Yogesh Patil | 0 | 0 | -14876 | 0 | 14876 |
| Edelweiss Large & Mid Cap Fund-Reg(G) | Abhishek Gupta | 0 | 0 | -147419 | 0 | 147419 |
| Edelweiss Multi Cap Fund-Reg(G) | Trideep Bhattacharya | 0 | 0 | -83451 | 0 | 83451 |
| Edelweiss Mid Cap Fund-Reg(G) | Trideep Bhattacharya | -271233 | 0 | 0 | 271233 | 271233 |
| Edelweiss Flexi Cap Fund-Reg(G) | Trideep Bhattacharya | 0 | 0 | -62591 | 0 | 62591 |
| Edelweiss ELSS Tax saver Fund-Reg(G) | Ashwani Agarwalla | 0 | 0 | -17812 | 0 | 17812 |
| Edelweiss Recently Listed IPO Fund-Reg(G) | Bhavesh Jain | 0 | 0 | -20865 | 0 | 20865 |
| Total | 6,63,11,692 | 7,12,15,839 | 11,68,77,709 | |||
| Diff | -5,05,66,017 | -49,04,147 | -4,56,61,870 |
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