Powered by

Home Podcasts

The National Stock Exchange Wants To Start Derivatives Trading 6pm-9pm

The National Stock Exchange has sought Securities and Exchange Board of India's approval to hold evening trading sessions in the equity derivatives segment. The NSE wants to extend trading hours of index futures and options to continue between 6 and 9 pm

By Govindraj Ethiraj
New Update
NSE Derivatives Trading
On today’s episode, financial journalist Govindraj Ethiraj talks to Namrata Mittal, Economist at SBI Mutual Fund. 

Our Top Reports For Today

  • [00:00] Stories Of The Day
  • [01:00] Markets And The Rupee
  • [01:37] Forget the sundowner. The National Stock Exchange wants to start derivatives trading between 6 and 9 pm.
  • [04:22] Foreign funds will flow into Indian Government bonds but that comes with some additional scrutiny.
  • [16:46] India is waiting for Tesla’s car factory but then so are several other countries.
  • [22:06] And hmm..where in India you should really buy your booze.
  • [23:37] Late night talk shows in America might return as the Hollywood writers strike could end


NOTE: This transcript contains only the host's monologue and does not include any interviews or discussions that might be within the podcast. Please refer to the episode audio if you wish to quote the people interviewed. Email [email protected] for any queries.

---

Markets, The Rupee And Government Bonds

I did mention on Monday morning that while I could not really say which way the market would go, I was not seeing any upward trigger for it.

Turns out I was very slightly wrong.

The stock markets were volatile on Monday and the BSE Sensex went up and down before closing 15 points higher at 66,024. The Nifty50, on the other hand, was unchanged at 19,676. Or it didn't go anywhere. 

So, I was slightly right too.

But I would of course hesitate to make these guesses too often because in my experience, the markets tend to punch you in the face.

Meanwhile, if you are an active markets trader and particularly into derivatives, you can forget about your weekday sundowners. 

The National Stock Exchange has sought Securities and Exchange Board of India's approval to hold evening trading sessions in the equity derivatives segment.

The NSE wants to extend trading hours of index futures and options to continue between 6 and 9 p.m.

Equity derivatives trading in the extended hours will be considered as the next day's volumes to avoid complications, an exchange official told BQ Prime.

It will take "at least a couple of months" for these extended hours for derivative trading to go live.

Global global events tend to have an impact on India's capital markets. "The idea behind these extended hours is to take one small step towards what the other global exchanges and other advanced countries have already accomplished, the official said adding that they are currently considering only index-based futures and options for trading in extended hours, which will not impact the "interoperability" of other exchanges, he said.

All this possible, the official said because of technological sophistication that was possibly nonexistent earlier.

---

Meanwhile, despite the promise of billions of dollars flowing into the country following JP Morgan’s inclusion of India in its bond index, the rupee itself is not really showing much signs of life.

The rupee was at Rs 82.80 before JP Morgan’s decision and Rs 83.11 after. 

The Indian rupee's outlook remains weak and any rally in the currency following JPMorgan's index inclusion should be used to build long USD/INR positions, economists at Nomura said in a note, quoted by BQ Prime. 

Nomura said actual inflows from passive funds are unlikely until around June 28, 2024, when the bonds will be included, and active fund houses will need to be mindful of their tracking error limits.

Actual inflows may be smaller with some real money managers that have already invested about 2%-3% on average, the brokerage said.

"India's current account could come under further pressure from a widening trade deficit," Nomura said in the note.

The recent ban on rice exports and rise in oil prices could widen India's trade deficit by around $17 billion on an annualised basis, it added.

The observation on rice exports and its link to the trade deficit is interesting since it was all there for all to see. Remember, we have banned exports of non basmati rice.

Staying with bonds, inflows and outflows..JP Morgan’s move to include Indian government bonds to its emerging markets bond index from June next year will mean more scrutiny from foreign investors on public finances.

While global asset managers play a small role in the Indian market, inflows have been picking up since the government loosened rules in 2020 on the bonds foreigners can own. 

India’s weighting will reach a maximum 10% in the JPMorgan’s benchmark index, which accounts for $213 billion in assets.

To get a sense on how the likely flow of funds into Indian Government bonds was likely to play out and its competitive position, versus all over options that overseas investors might have, I spoke with Namrata Mittal, Economist at SBI Mutual Fund, a joint venture between State Bank of India and Amundi of France.

----

On debt and moving on to banks, the Reserve Bank of India governor dropped a small bomb today when he said that the Central Bank has noticed "excessive dominance" by one or two board members even in "big commercial banks" and asked the lenders to desist from such practices.

Board discussions have to be free, fair and democratic, Das said, addressing directors of Urban Cooperative Banks (UCBs) at a meeting organised by the Reserve Bank of India (RBI) here.

His comments could encompass public sector or state owned banks that are most likely targeting the private ones, notably where there is a founder or CEOs presence looming large.

This has always been the case in the past with private banks where overpowering personalities have been CEOs and thus held sway on the rest of the board.

Chanda Kochhar of ICICI Bank is obviously one example given that her board seemed to wilt under her power. And the board clearly gave her considerable leeway when they should have asked her to step aside given the allegations which subsequently led to chargesheets and arrests.

Rana Kapoor is another instance where, although in hindsight, seemed to have rammed through lending decisions which may have faced some hurdle in normal circumstances.

And most recently of course Uday Kotak of Kotak Bank who has stepped down as MD & CEO but was seen as a case of someone who could exert influence on the board and its decision making even if he were not the CEO, thanks to his majority shareholding.

Speaking of non compliance, the RBI has announced that it has  slapped monetary penalties on three state owned banks, State Bank of India, Indian Bank and Corporation Bank for various noncompliances with RBI regulations with fines ranging between Rs 1 and 1.6 crore.

IMPORT LICENCES

​​India is further liberalising its planned restrictions on imports of laptops, tablets and other IT hardware, giving manufacturers such as Apple Inc., HP Inc. and Dell Technologies Inc. more time to prepare for potential curbs, Bloomberg News is reporting.

India will do away with a compulsory licensing requirement for tech importers, and will instead only ask such companies to register under its so-called import management system, sources told the news agency. The system will start operating on Nov. 1, they said, asking not to be named as the matter isn’t public.

The move to licence imports follows a larger thinking of boosting local production for consumer electronics including high end laptops.

The move sent shock waves not so much for its intent but its suddenness and the seeming lack of prior consultation which could have been easily done.

The lack of consultation of course is  a common feature with several such policy decisions sprung upon industry for reasons it is not clear at all.

Last month, the Government said it was imposing import licences in a move that shocked companies like Apple and Samsung Electronics Co. A day later India’s trade regulator delayed the move by three months.

According to the latest plan, all companies bringing everything from tablets and laptops to desktop computers and servers into India will have to register. 

Now, instead of cutting back imports, inbound shipments won’t be affected for six to nine months, according to the report.

Earlier, India had unveiled  a $2.1 billion financial incentive plan to incentivise computer makers to manufacture in the country and several companies have already applied or begun applying for these.

The Core Report had earlier spoken to representatives of India’s electronics industry who made a strong case for local manufacturing and felt that with the right incentives and sticks, global manufacturers could very well move manufacturing into India and at competitive costs.

Of course, India as a manufacturing cum export base - the local market is unlikely to be big enough on its own - is something that is evolving and will take some time before, say, an Apple gets the confidence to do full high end manufacturing here.

As I understand, it would take more to make a full laptop in India as opposed to assembling an iphone 15. 

The good news of course is that we are all headed in that direction and could obviously do without sudden shock and awe policy pronouncements.

Will Elon Musk Really Build His Factory Here?

Speaking of manufacturing, of course Elon Musk met Prime Minister Narendra Modi and promised to explore investing in India, as soon as humanly possible to quote his own words. 

But he is having conversations with several countries.

Of course, Tesla teams are visiting India right now to talk about, well,  Powerall, its battery storage system for India and seeking incentives to build a factory, Reuters has reported. 

All good, except that is the battery storage system first or the car later or are these two independent pitches ?

I don’t know.

Tesla's Powerwall looks like a single door refrigerator in height but much sleeker in depth if you get the picture and can be hung from a wall. 

Tesla has of course been in talks about setting up a new electric vehicle (EV) factory in India to build a car priced around $24,000 for weeks. That is of course cheaper than any other car elsewhere but we don’t know if this is on road or ex factory. 

Yes, these details do matter in India. Because at Rs 20 lakh it's not a small or affordable car even with the Tesla badge. In which the market size for it shrinks.

Anyway, back to the Powerall, in recent meetings in New Delhi, Tesla proposed the "Powerwall", a system that can store power from solar panels or the grid for use at night or during outages, said the sources who declined to be named as the matter is confidential.

Although Tesla sought a number of incentives to set up a battery storage factory, Indian officials conveyed these would not be available, one of the sources said. But they added that the government could help create a fair business model for the company by offering subsidies to those purchasing such products.

During a 2015 visit to Tesla's California campus accompanied by Musk, PM Modi apparently reviewed the product and later said he had enjoyed discussing how battery technology could help farmers, according to Reuters.

With incentives, Powerwall costs more than $5,500 in California, with additional costs for solar panels. 

Now, back to electric cars. 

Bloomberg is reporting in a very interesting dispatch that barely a day goes by without another headline alluding to Tesla possibly setting up shop in a new part of the world.

Just last week, for example:

  • On Sunday, Elon Musk met with Turkish President Recep Tayyip Erdogan, who asked the Tesla CEO to build a factory in his country.

  • On Monday, the Wall Street Journal reported that Saudi Arabia and Tesla were in talks about a manufacturing facility in the kingdom.

  • On Wednesday, Thailand’s new premier told Bloomberg Television that Tesla is among the US companies he’s courting for investment.

  • And finally on Thursday, Reuters reported that Tesla had drawn up plans to make battery storage systems in India.

Talk of potential Tesla plants came up when Musk met with South Korean President Yoon Suk Yeol in April, French President Emmanuel Macron in May, and Indian Prime Minister Narendra Modi in June. Other countries mentioned this year include Indonesia, Mongolia, Spain and Portugal.

Musk’s response to all this attention has varied. He’s told Erdogan, Yoon, Macron and Modi that their countries are in the mix as Tesla considers future investment. 

Apparently he dismissed the WSJ’s report on Saudi Arabia, calling it “utterly false.” And was also reportedly furious that talks it was having with Spain leaked.

But what if, asks Bloomberg, Musk has decided Tesla has more than enough car making capacity for the moment?

Now, Tesla’s ambition is to sell 20 million EVs a year by the end of the decade. The four car factories the company is operating currently can produce just over 2 million vehicles annually. 

Even after scaling up those facilities, plus a fifth plant going up in Mexico, Tesla will need quite a few more plants to reach the level of output it’s aiming for just seven years from now. All these plants are called Gigafactories by the way.

“He gives a very clear message about what happened to the global economy, and concern also about the overcapacity today,” Luhut Pandjaitan, Indonesia’s coordinating minister for maritime affairs, said two weeks ago about a meeting with Elon Musk

“So they’re not going to do any expansion for the next one or two years,” he said, referring to Tesla.

Musk was “very frank to us,” Pandjaitan added, saying that Musk alluded to not wanting to go bankrupt like General Motors and Chrysler did in 2009.

The same day as Bloomberg’s conference, Mexico’s Reforma reported that Tesla had pumped the brakes with parts makers it had been pressuring to lay down roots near the car plant it’s constructing in Monterrey. 

An unidentified source at a Chinese supplier told the newspaper that there had been a rush two or three months earlier, and that a month later, Tesla told the supplier to wait.

Tesla has been slashing prices all year to boost deliveries. After telling investors in January that there was potential for the company to produce 2 million cars in 2023, the CEO cautioned during Tesla’s last quarterly earnings call in July that it would stick with a target of 1.8 million.

Of course Tesla may choose India over all these options because of all the other reasons we hear often. But it is good to know what the landscape is looking like.

Hollywood Strike, Only Writers Strike Ending

If you are a fan of the late night shows in the United States, you might be seeing your favourite Jimmy Kimmel, Stephen Colbert, Jimmy Fallon and Drew Barrymore come back to the small screens and onstage.

The Writers Guild of America, which represents more than 11,000 screenwriters, reached a tentative deal on a new contract with entertainment companies on Sunday night, all but ending a 146-day strike that has contributed to a shutdown of television and film production, the NYT is reporting.

In the coming days, guild members will vote on whether to accept the deal, which has much of what they had demanded, including increases in compensation for streaming content, concessions from studios on minimum staffing for television shows, and guarantees that artificial intelligence technology will not encroach on writers’ credits and compensation.

But much of Hollywood will remain at a standstill: Tens of thousands of actors remain on strike, and no talks between the actors’ union, SAG-AFTRA, and the studios were scheduled.

The upshot: In addition to actors, more than 100,000 behind-the-scenes workers (directors, camera operators, publicists, makeup artists, prop makers, set dressers, lighting technicians, hair stylists, cinematographers) in Los Angeles and New York will continue to stand idle, many with mounting financial hardship. California’s economy alone has lost more than $5 billion from the Hollywood shutdown, according to Gov. Gavin Newsom.

While Hollywood struggles to find its feet again after Covid and a self imposed strike, Indian cinema is doing well, more on that tomorrow though.

And hmm..a bottle of booze that costs Rs 513 in Karnataka costs Rs 100 in Goa

An analysis conducted by The International Spirits and Wines Association of India for Times of India says a bottle of spirit – encompassing whisky, rum, vodka, and gin – that retails for Rs 100 in Goa can escalate to Rs 134 in Delhi and an astonishing Rs 513 in Karnataka.

Karnataka of course is next door and shares a common border with Goa.

We of course know Goa is cheap but this is surprising indeed.

While Goa's tax rates, at 49% of the Maximum Retail Price (MRP), are not the lowest, they pale in comparison to Karnataka's 83% and Maharashtra's 71%, the TOI report says. 

The price differential takes into account import duties applicable to foreign liquor products, which remain consistent across states. 

The disparity in state taxes has also led to significant price variations of over 20% for popular Scotch brands between cities like Delhi and Mumbai. 

For example, a bottle of Black Label, which costs around Rs 3,100 in Delhi, fetches nearly Rs 4,000 in Mumbai, says the TOI report.

I could of course go on with more brands and prices but am sure you will find out very soon!