Month: July 2024

The Securities and Exchange Board of India’s (SEBI) proposed F&O measures to the derivatives trading framework are set to significantly impact the market, particularly with the removal of 12 out of 18 weekly option contracts. Brokerage house Jefferies highlighted that these changes will affect 35 percent of industry premiums.

On Tuesday, SEBI released a discussion paper outlining seven key proposed changes aimed at enhancing investor protection and market stability. Among these, the most consequential is the reduction in the number of weekly option contracts to just one benchmark index per exchange, resulting in a total of six weekly contracts per month, compared to the current 18. Monthly contracts, set for the fourth week of the month, will remain unchanged.

Jefferies warned that exchanges and retail-focused brokers would be most affected by these changes. The BSE might mitigate the impact and potentially benefit if volumes spill over from the discontinued products. Discount brokers such as Zerodha, Angel One, and Paytm Money are expected to face a significant impact due to the tightening of the F&O market and recent orders on transaction charges. Traditional brokers, including MOFSL, IIFL Securities, and ICICI Securities, are anticipated to experience a high impact from the tightening of the F&O market, but only a low impact from the recent transaction charge orders.

Jefferies has listed some key issues that might arise from said amendments.

Reduction in weekly options: Currently, weekly premiums make up 65 percent of overall industry premiums, and depending on the choice of index (to be continued) by exchanges, the supply of contracts amounting to 35 percent of industry premiums can be removed. Spillover of trading activity (if any) from these into the two continuing products can limit the impact to 20-25 percent for the system, noted Jefferies. Also, phased hikes in lot sizes (by 3-4x) and margin hikes near expiry can impact retail traders, said the brokerage.

Lower retail participation (from higher lot sizes) can magnify impact: SEBI highlighted that around 92 lakh unique individuals and proprietorship firms made a cumulative loss of ₹51,700 crore in FY24 and within them, only 15 percent of traders (14 lakh) made net profits, informed Jefferies. On the other side, larger non-individual players like HFTs/algo-traders/FPIs are, in general, making offsetting profits. SEBI has proposed a 3-4x hike in lot sizes in a phased manner over 6 months which will lead to higher ticket sizes even on expiry days. While small retail (less than ₹10 lakh monthly premiums) make up less than 3 percent of system premiums, the overall impact from their reduced participation can be magnified as they may be contributing to the profit pool disproportionately, noted the brokerage.

Higher margin impacts options sellers, other measures are incremental: As per the brokerage, the proposed hike in margins (by 8pp) near expiry will reduce the leverage for option sellers and impact product profitability. While larger institutional players may absorb the impact due to high leverage, HNI/retail individuals with low to NIL leverage will see more impact and can reduce volumes in the absence of additional margin money/assets. Other measures like a) rationalization of strike prices, b) upfront collection of premiums, c) removal of calendar spreads, and d) intraday monitoring of limits are incremental and will improve the quality of premiums over the long term, it noted.

Divergent impact on market players: Jefferies sees exchanges and retail-focused brokers being most affected by the proposed changes. Clearing members like Nuvama (Asset Services business) cater to institutional players (HFTs / FPIs) which are less impacted but may see some second-order impact. For BSE, the removal of the Bankex weekly contract can impact EPS by 7-9 percent over FY25-27E.

In its scenario analysis, gains from the spillover of trading activity from discontinued products can offset EPS impact and in the event of a moderate industry-wide impact of SEBI measures, can even drive EPS upgrades, predicted the brokerage.

The 7 proposals are listed below:

1. Rationalisation of weekly index products: Weekly options contracts are to be provided on a single benchmark index of an exchange.

2. Minimum contract size: Given growth witnessed in the broad market parameters, the minimum contract size for index derivatives contract is to be revised, in a phased manner:

a. Phase 1: Minimum value of derivatives contract at the time of introduction to be between ₹15 lakh and ₹20 lakh.

b. Phase 2: After 6 months, the minimum value of derivatives contracts to be ₹20 lakh to ₹30 lakh.

3. Increase in the margin near contract expiry: The margins on expiry day and the day before expiry shall be increased in a below-stated manner:

a. At the start of the day before expiry, the Extreme Loss Margin (ELM) is to be increased by 3 percent.

b. At the start of the expiry day, ELM is to be further increased by 5 percent.

4. Rationalisation of options strikes: The strike scheme for weekly/monthly index options contracts shall be based on the following principle:

a. Strike interval to be uniform up to a fixed percentage coverage near prevailing index price, i.e. 4 percent around prevailing index price.

b. Beyond the initial coverage threshold, specified at (a) above, the strike interval is to be expanded to ensure that fewer strikes are introduced further away from the prevailing index price.

c. The number of strikes at the time of introduction should not be more than 50.

d. New strikes to be introduced to comply with the aforesaid requirement at and above, daily.

5. Upfront collection of option premiums from options buyers: Members to collect option premiums on an upfront basis from the clients.

6. Removal of calendar spread benefit on the expiry day: The margin benefit for calendar spread positions would not be provided for positions involving any of the contracts expiring on the same day.

7. Intraday monitoring of position limits: The position limits for index derivative contracts shall be monitored by the clearing corporations/stock exchanges on an intra-day basis, with an appropriate short-term fix, and a glide path for full implementation.

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Shares of Varun Beverages crashed around 7 percent in intra-day deals today, July 30, even after it posted decent results for the quarter ended June 2024 (Q2CY24). The firm also announced a stock split and an interim dividend with the results.

The PepsiCo bottler reported a 25.5 percent increase in profit after tax (PAT), reaching ₹1,261.83 crore for the June quarter, up from ₹1,005.42 crore in the same quarter last year. This profit growth was driven by volume increases and improved margins.

Revenue from operations grew by 28.3 percent year-on-year (YoY) to ₹7,196.86 crore, compared to ₹5,611.40 crore in the year-ago quarter.

Earnings before interest, taxes, depreciation, and amortization (EBITDA) saw a 31.8 percent rise, reaching ₹1,991.2 crore YoY, up from ₹1,511.02 crore in the same period a year ago. The EBITDA margin improved by 74 basis points (bps) to 27.7 percent in Q2CY24, led by higher gross margins.

Gross margins also showed a significant improvement, rising by 222 bps to 54.7 percent from 52.5 percent during Q2CY23. The company attributed this growth to the timely procurement and storage of PET chips to benefit from pricing advantages, a focus on reducing sugar content, and lightweight packaging.

The consolidated sales volume grew by 28.1 percent to 40.16 crore cases in Q2CY24, up from 31.35 crore cases in Q2CY23. This figure includes 28 million cases from BevCo during the quarter. India volumes grew by 22.9 percent, while international volumes (excluding BevCo) remained flat, primarily due to the transition to zero sugar products in Zimbabwe, which did not affect profits.

“With strong performance in a key quarter, we are on track to deliver healthy double-digit growth this calendar year. India remains a high-demand market with massive growth potential, driven by a growing consuming class and a young population. To capitalize on this demand, we are focused on further strengthening our infrastructure, distribution network, and product portfolio. With a focus on strategic growth and leveraging new opportunities in both Indian and international markets, we are confident in our ability to deliver sustainable value to all stakeholders,” said Ravi Jaipuria, Chairman of Varun Beverages.

Varun Beverages announced a 2:5 stock split and an interim dividend of ₹1.25 per share for its shareholders.

“Sub-division/ split of the existing Equity Shares of the Company, such that each Equity Share having face value of ₹5/- (Rupees Five only) each fully paid-up, be sub-divided/split into such number of equity shares having face value of ₹2/- (Rupees Two only) each fully paid-up, subject to the approval of equity shareholders of the company through Postal Ballot,” the company stated in a filing with the stock exchanges.

This move is intended to encourage wider retail participation, according to Ravi Jaipuria. The record date for the split of existing shares will be decided after obtaining the necessary approval from the equity shareholders.

Despite the strong financial performance, the stock fell as much as 6.9 percent to ₹1,566.85 in intra-day trading on Tuesday. The stock is now over 8 percent away from its record high of ₹1,707.10, reached in the previous session. However, it has advanced 97 percent from its 52-week low of ₹796, recorded on July 31, 2023.

In the past year, the stock has provided multi-bagger returns, rallying nearly 110 percent and adding around 27 percent in 2024 year-to-date.

The sharp intra-day decline in Varun Beverages’ shares indicates a possible profit-booking by investors or market concerns over future growth prospects despite the company’s robust quarterly performance and strategic initiatives.

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Stock market today: After hitting fresh record highs, Indian stock market benchmarks, the Nifty 50 and the Sensex, closed flat on Monday, July 29, due to profit booking at higher levels as investors continued their strategy of buying cheap and selling at higher prices keeping elevated valuation in mind.

The Nifty 50 almost touched the coveted 25,000 mark as the index hit a fresh record high of 24,999.75 during the session. The 30-share pack Sensex also hit a fresh all-time high of 81,908.43 in intraday trade.

Eventually, the Nifty 50 closed just 1 point higher at 24,836.10, while the Sensex closed 23 points higher at 81,355.84.

Shares of Larsen and Toubro, Reliance Industries, and Mahindra and Mahindra contributed the most to the gains in the Nifty 50 index. On the other hand, shares of HDFC Bank, Bharti Airtel, and ITC ended as the top drags on the index.

“While benchmark indices hit fresh intra-day lifetime highs and the Nifty almost touched the 25k mark, most of the gains were lost, and markets ended off their highs amid profit-taking in IT and telecom stocks. Going ahead, global market direction and corporate earnings will dictate the trend”.

Global peers were largely positive while investors await the policy meeting outcomes of the UD Federal Reserve, Bank of England (BoE), and Bank of Japan (BoJ) this week.

“An ease in the US personal consumption expenditure to 2.5% and the subsequent drop in the US 10-year yield have fuelled optimism that the Fed might cut rates in September, leading to a global rally. However, profit-booking was triggered in the domestic market given trading in the overbought territory and closed flat”.

The US Fed is expected to keep interest rates steady on Wednesday, July 31, but it may hint at a cut at its next policy meeting in September, considering easy inflation and a resilient economy.

BoJ, on the other hand, may increase rates by 10 basis points to 0.2 percent on Wednesday. The BoE may go for a 25 bps rate cut on Thursday, August 1.

“Policy meeting is scheduled for the Fed, BOJ, and BOE this week, and investors are closely monitoring the developments. It is anticipated that the BOE may implement a 25-bps rate cut in response to easing inflation”.

While the benchmarks ended flat, the mid and small-cap segments continued witnessing strong gains. The BSE Midcap index rose 0.80 percent, while the Smallcap index jumped 1.17 percent.

Thanks to the gains in the second-rung indices, the overall market capitalization of the firms listed on the BSE rose to nearly ₹460 lakh crore from nearly ₹457 lakh crore in the previous session, making investors richer by nearly ₹3 lakh crore in a single session.

As many as 404 stocks, including Infosys, NTPC, Sun Pharma, Tata Motors, TCS, and Tech Mahindra, hit their fresh 52-week highs in intraday trade on BSE.

25 stocks ended in the green and the same number of stocks ended in the red in the Nifty 50 index.

Shares of Divi’s Labs (up 2.93 percent), BPCL (up 2.92 percent), and Larsen and Toubro (up 2.58 percent) closed as the top gainers in the Nifty 50 index.

On the flip side, shares of Bharti Airtel (down 2.08 percent), Titan (down 1.95 percent) and Cipla (down 1.40 percent) ended as the top losers in the index.

Most sectoral indices ended with gains. Nifty PSU Bank rose 2.25 percent, followed by the Media (up 1.80 percent) index.

Nifty Realty (up 1.43 percent) and Oil and Gas (up 1.04 percent) also clocked strong gains.

The Nifty Bank index ended 0.22 percent higher, while the Private Bank index climbed 0.28 percent.

The market today found it difficult to hold gains. Shrikant Chouhan, the head of equity research at Kotak Securities, pointed out that the market opened on a positive note, but due to profit booking at higher levels, it failed to sustain above 24,950/81,750 levels.

“From the day’s highest level, the market shed over 200 /750 points. However, the short-term market texture is still on the long side. We are of the view that the intraday market texture is non-directional; hence, buying on intraday correction and selling on rallies would be the ideal strategy for day traders,” said Chouhan.

“For traders now, 24,700-24,650/81,000-80,800 would be the key support areas while 24,950 -25,000/81,750-82,000 would act as crucial resistance areas for the bulls. On the flip side, below 24,650/80,800, the uptrend would be vulnerable,” said Chouhan.

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Stock to buy on Monday: Borosil Renewables share price has been on an uptrend for the last five sessions. The solar glass stock witnessed strong buying on, before, and before the presentation of Union Budget 2024. In one week, Borosil Renewables shares surged from around ₹469.50 to ₹541 apiece on the NSE, logging a nearly 15 percent rise in this time frame.

According to stock market experts, Borosil Renewables’ share price is looking positive from the fundamental perspective after the Budget 2024. The Government of India has announced the installation of rooftop solar systems on 10 million homes as part of the Pradhan Mantri Suryodaya Yojana. On the technical chart pattern, Borosil Renewables’ share price looks strong and may become further bullish once it gives a fresh breakout at ₹570. So, the solar stock is on the cusp of providing a fresh breakout on the chart pattern.

Triggers for Borosil Renewables share price

Highlighting the fundamental factors that are fueling Borosil Renewables share price, Parth Shah, Research Analyst at StoxBox, said, “Most solar energy-related stocks across the value chain, including Borosil Renewables, have witnessed traction in the last few trading sessions on expectations of improved business performance in future after the government announced a 10% basic customs duty on solar glass imports starting 1 October 2024. The proposed government move would benefit domestic manufacturers by limiting the import of solar glass from other countries. Also, the government’s increased focus on implementing the PM Surya Ghar Muft Bijli Yojana is expected to improve the offtake of solar panels. We believe that the company is poised to benefit in the medium to long term from the sectoral tailwinds along with its focus on improving its capacity and financial performance.”

Echoing StoxBox’s views, Amit Goel, Co-Founder and Chief Global Strategist at Pace 360, said, “The solar industry is experiencing positive momentum as solar installations have grown significantly. Moreover, the government has mandated using only ALMM-certified modules in new projects. This regulation boosts domestic module manufacturing and, consequently, the demand for solar glass. The company is well-positioned to capitalize on this demand.”

“Furthermore, the capacity for producing solar glass has reached 2,300 tons per day, with Borosil Renewables being the world’s largest non-Chinese-owned manufacturer. Demand will be further stimulated by the government’s goal of installing rooftop solar systems on 10 million homes as part of the Pradhan Mantri Suryodaya Yojana. Overall, Borosil Renewables is well-prepared to take advantage of these sectoral tailwinds and growth opportunities,” the Pace 360 expert said.

Breakout stock in making?

Speaking on stocks to buy on Monday, Sumeet Bagadia, Executive Director at Choice Broking, said, “Borosil Renewables’ share price is looking strong on the technical chart. The stock has been on an uptrend on the daily and weekly charts. The scrip may become highly bullish after giving a fresh breakout on the technical chart at ₹570 apiece. So, the stock is expected to remain under the radar of bulls as it is on the cusp of giving a fresh breakout.”

“If the stock breaks out above ₹570, Borosil Renewables’ share price may soon touch ₹600 per share. So, Borosil Renewables shareholders are advised to hold the scrip, maintaining a stop loss at ₹520 apiece. Fresh investors can also buy Borosil Renewables shares for a short-term target of ₹600, maintaining a strict stop loss at ₹520,” Bagadia said.

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Shares of IDBI Bank crossed the ₹100 mark for the first time in 10 years during today’s intraday session, gaining 7%. This follows the previous session during which the stock surged by 13%. This recent rally has pushed the stock to gain 51% in the current year so far. 

The stock last reached the ₹100 mark in July 2014. It fell to an all-time low of ₹18 in April 2020. However, the stock began its upward trajectory in June 2022 and has since seen a remarkable gain of 226%.

Media reports indicate that the Reserve Bank of India’s (RBI) vetting process to identify potential bidders for the bank is nearing completion. Tuhin Kanta Pandey, Secretary of the Department of Investment and Public Asset Management (DIPAM), shared this significant update with Moneycontrol, indicating that the privatization efforts are progressing smoothly.

The bank has been slated for privatization for several years. In October 2022, the government invited Expressions of Interest (EoIs) for IDBI Bank, offering to sell a combined 60.72% stake, with 30.48% from the government and 30.24% from LIC, along with transferring management control.

Post-sale, the government and LIC will collectively retain a 34% residual stake in the bank.

Recently, the Reserve Bank of India issued a ‘fit and proper’ report on potential bidders, moving the divestment process forward. This evaluation by the RBI ensures that the bidders meet the necessary criteria to comply with regulations, enabling the privatization process to advance to the next stage, according to media reports.

To qualify, bidders for IDBI Bank must have a minimum net worth of ₹22,500 crore and have reported net profits in three of the last five years.

On the other hand, the bank reported a healthy set of numbers for the June quarter (Q1FY25), with a 40% YoY jump in its standalone net profit to ₹1,719 crore. 

In the same period last year, the bank reported a net profit of ₹1,224 crore. Seeing sequentially, the net profit improved by 5.50% as the bank in Q4FY24 recorded a net profit of ₹1,628 crore.

The bank’s net interest income during the reporting quarter dropped to ₹3,233 from ₹3,998 crore. The net interest margin of the bank came in at 4.18% in Q1, a drop from 5.80% in Q1 FY24.

In Q1-2025, the return on assets (ROA) increased by 34 basis points to 1.83%, compared to 1.49% in Q12024. The cost of deposits rose to 4.58% in Q12025, up from 4.12% in the same quarter of the previous year. Similarly, the cost of funds increased to 4.81% in Q12025, compared to 4.40% in Q12024.

On the asset quality front, the gross non-performing assets (NPA) ratio improved to 3.87% as of June 30, 2024, down from 5.05% a year earlier. The net NPA ratio also showed improvement, decreasing to 0.23% as of June 30, 2024, from 0.44% on June 30, 2023.

Additionally, the provision coverage ratio, including technical write-offs, rose to 99.34% as of June 30, 2024, up from 98.99% a year prior, according to the bank’s earnings filing.

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