-Monthly Market Review

Transcription

1 -ly Market Review May 2018

2 Global Regulatory Scanner Federal Reserve releases paper on Collateral Runs : Broker-dealers are unique because they transform liquidity on both sides of their balance sheet. On the liabilities side, they typically borrow short-term from money market funds using financial securities as collateral. On the asset side, they provide credit, also typically shortterm, against similar collateral provided by hedge funds. Most hedge funds cannot contact money market funds directly as they are small and relatively opaque firms, which wholesale cash lenders such as money market funds will not (or cannot) interact directly. To summarize, the broker-dealer re-uses the collateral it receives from hedge funds to issue secured debt to money market funds, a process known as rehypothecation. In the context of the global financial crisis, a large literature has noted that financial institutions faced run risk on the liabilities side from their wholesale funding lenders. In this paper, the authors highlight an alternative channel, which operates on the asset side of the balance sheet--collateral runs. Unlike traditional wholesale funding runs, where dealers risk an abrupt withdrawal of funds from lenders, in collateral runs, dealers risk an abrupt withdrawal of collateral from collateral providers. The mechanism for collateral runs is described below. The dealer has market power which allows it to set favorable contracting terms on both secured financing transactions. In particular, the dealer has incentives to lend only a fraction of the cash raised from money market funds to hedge funds and use the difference to finance higheryielding risky assets, which are illiquid. In case the dealer defaults, money market funds have immediate access to the collateral and can sell it to make their claims whole, essentially insulating them from the dealer. In contrast, hedge funds risk losing their collateral altogether, which is more valuable than the initial loan they received (because of haircut/margin). This arrangement effectively gives hedge funds an unsecured claim on the dealer and creates incentives for them to withdraw their collateral early, rather than roll over their repos. The incentive to withdraw the collateral creates strategic complementarities amongst hedge funds actions because each hedge fund s optimal action and payoff can depend on what other hedge funds do. For example, if all other hedge funds roll over their repo positions, then the dealer does not need to liquidate any illiquid assets, making it optimal for an individual hedge fund to roll over as well. On the contrary, if all other hedge funds withdraw their collateral, then the dealer may need to sell off all illiquid assets, making it optimal for an individual hedge fund to withdraw their collateral as well. Hence, an individual hedge fund s payoff not only depends on the dealer s solvency, but also on beliefs about the actions/beliefs of other hedge funds. For more details see 1

3 Global News World Bank publishes report on Global Economic Prospects: The key highlights of the report are: Global growth is projected to reach 3.1 percent in 2018 the same pace as After reaching 3.1 percent, global growth is expected to moderate over the next two years (to 2.9% by 2020) as global slack dissipates, trade and investment moderate, and financing conditions tighten. Growth in advanced economies is forecast to decelerate (2.2% in 2018 and 2% in 2019) as monetary policy stimulus is pared down, higher energy prices weigh on consumption, and the effects of U.S. fiscal stimulus wane. Growth in EMDEs is projected to gain further strength, reaching 4.5 percent in 2018 before stabilizing at 4.7 percent in Growth in commodity exporting EMDEs is expected to increase to 2.5 percent in 2018 and to average 3.0 percent in 2019 and 2020, as investment growth remains flat and output gaps close. Growth in commodity importing EMDEs is projected to remain broadly stable in , averaging 5.8 percent, as a structural slowdown in China is offset by a moderate pickup in the rest of the group. India is expected to grow at 7.3% in and 7.5% in , reflecting robust private consumption and strengthening investment. The downside risk to global growth broadly include disorderly financial market movements, escalating trade protectionism, heightened policy uncertainty, and rising geopolitical tensions. To confront these risks and bolster long-term growth, policymakers need to rebuild policy buffers and be prepared for rising global interests and possible episodes of financial market turbulence, accelerate reforms to boost competitiveness, adapt to technological change, and promote trade openness. For a detailed report, please see: Key circular issued by SEBI in May 2018 Circular for implementation of certain recommendations of the Committee on Corporate Governance under the Chairmanship of Shri Uday Kotak (SEBI: May 10, 2018): The Committee on Corporate Governance under the Chairmanship of Shri Uday Kotak made several recommendations in the report submitted to SEBI on October 5, Some of these recommendations have been accepted by SEBI and the necessary amendments are made in SEBI s Listing Obligations and Disclosure Requirements (LODR) Regulations, 2015 vide 2

4 notification dated May 9, There are a few recommendations that have been accepted by SEBI s board, but still need to be implemented through issue of a circular. Accordingly, the following provisions shall apply to entities whose equity shares are listed on a recognized stock exchange: 1. Disclosures on board evaluation: The listed entity may consider the following as a part of its disclosures on board evaluation: i. Observations of board evaluation carried out for the year ii. year s observations and actions taken iii. Proposed actions based on current year observations. 2. Group Governance Unit: Where the listed entity has a large number of unlisted subsidiaries: i. The listed entity may monitor their governance through a dedicated group governance unit or Governance Committee comprising the members of its board of directors. ii. A strong and effective group governance policy may be established by the entity. iii. The decision of setting up of such a unit/committee or having su ch a policy shall lie with the board of directors of the listed entity. 3. Medium-term and long-term strategy: The listed entity may consider the following with respect to disclosure of medium-term and long-term strategy of the entity: i. It may disclose, under the Management Discussion and Analysis section of the Annual report, within the limits set by its competitive position, its medium-term and long-term strategy based on a time frame as determined by its board of directors ii. The listed entity may articulate a clear set of long-term metrics specific to the company's long term strategy to allow for appropriate measurement of progress. To view the circular, please refer to: / pdf#page=1&zoom=auto,-23,800 3

5 Performance of Broad Market Asset Class Exchange EQUITY NIFTY 50 NIFTY BANK NIFTY IT INDIA VIX DOWJONE NASDAQ FTSE 100 HANGSENG NIKKEI COMMODITY GOLD SILVER COPPER ZINC ALUMINIUM NICKEL CRUDE- WTI CRUDE- BRENT NATGAS CURRENCY NSE NSE NSE NSE NYSE NASDAQ % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % USDINR Real Time FX % % EURUSD Real Time FX % % USDJPY Real Time FX % % GBPUSD Real Time FX % % US Dollar Index Real Time FX % % MONEY MARKET 10Y US BOND 10Y GSEC BOND NSE NYSE % % % % Source: in.investing.com 4

6 Primary Market Statistics Capital Raised Capital Raised in the Rs Mn USD Mn Newly issued shares (IPOs) FPOs Public issue of NCDs Further Issues (FIs) Total 43, Main Board Listing of the - IndoStar Capital Finance Limited Sector Financial Services Market Capitalisation (INR Crores) No of times subscribed 6.80 Listing Gains 4.89% SME Listing of the - Sirca Paints India Limited Sector Chemical Market Capitalisation (INR Crores) No of times subscribed 7.90 Listing Gains 1.25% IPO Listed during the month Sr. No. Listing Date Symbol Company Name Series 1 May 7, 2018 HITECH Hi-Tech Pipes Limited EQ 2 May 11, 2018 GODHA Godha Cabcon and Insulation Limited ST 3 May 11, 2018 SOFTTECH Softtech Engineers Limited ST 4 May 14, 2018 ORIENTELEC Orient Electric Limited BE 5 May 15, 2018 E2E E2E Networks Limited ST 6 May 21, 2018 FIVECORE Five Core Electronics Limited ST 7 May 21, 2018 INDOSTAR IndoStar Capital Finance Limited EQ 8 May 25, 2018 BOROSIL Borosil Glass Works Limited EQ 9 May 30, 2018 SIRCA Sirca Paints India Limited ST 5

7 Secondary Market Statistics Institutional Flows 1. Institutional Flows- CM Gross Broad Category Buy Value (Rs Crs) Sell Value (Rs Crs) Net (Rs Crs) DII FII Institutional Flows- F&O Gross Broad Category Buy Value (Rs Crs) Sell Value (Rs Crs) Net (Rs Crs) DII FII Institutional Flows- CDS Gross Broad Category Buy Value (Rs Crs) Sell Value (Rs Crs) Net (Rs Crs) DII FII Flagship Index NIFTY 50 Statistics Number of constituents : 51 Derivatives available : YES ETFs available : 14 PE PB 3.69 Div Yield

8 Average Daily Turnover (INR Crores) 4. Equity Market Cash Market % Exchange Traded Funds % SME EMERGE % Sovereign Gold Bonds % InvITs % Mutual Funds (Close Ended) % Equity Derivatives - Index Futures BANKNIFTY % NIFTY % NIFTYCPSE NIFTYINFRA NIFTYIT % NIFTYPSE

9 6. Equity Derivatives - Index Options BANKNIFTY % NIFTY % NIFTYCPSE NIFTYINFRA NIFTYIT NIFTYPSE Currency Derivatives- Futures EURINR % EURUSD % GBPINR % GBPUSD % JPYINR % USDINR % USDJPY % Currency Derivatives- Options EURINR % EURUSD % GBPINR % GBPUSD JPYINR % USDINR % USDJPY

10 9. NSE Bond Futures II 668GS % GS % GS GS GS % GS GS

11 Client Category Participation- Percentage contribution 1. Equity Market Corporates 8.07% 8.16% 7.94% 10.67% 8.11% 8.99% DII 10.19% 9.89% 12.43% 10.23% 10.05% 10.24% FII 16.70% 14.20% 28.30% 16.21% 15.51% 15.42% Others 44.93% 48.48% 1.14% 44.82% 46.63% 45.94% PRO 20.10% 19.26% 13.90% 18.07% 19.70% 19.41% Corporates 8.07% 8.16% 7.94% 10.67% 8.11% 8.99% 2. Equity Derivatives Corporates 8.99% 9.00% 23.64% 8.46% 9.00% 10.16% DII 0.41% 0.51% -0.04% 0.47% 0.46% 0.47% FII 12.62% 12.69% 23.20% 11.55% 12.65% 12.83% Others 35.39% 35.41% 23.75% 37.16% 35.40% 34.46% PRO 42.58% 42.38% 24.41% 42.37% 42.49% 42.08% Corporates 8.99% 9.00% 23.64% 8.46% 9.00% 10.16% 3. Currency Derivatives Corporates 12.11% 10.31% 61.21% 9.72% 11.35% 10.45% DII 1.60% 1.03% % 0.69% 1.36% 1.14% FII 3.61% 3.94% 25.53% 3.04% 3.75% 3.58% Others 14.59% 14.17% 41.23% 14.54% 14.41% 14.95% PRO 68.08% 70.55% 32.38% 72.01% 69.12% 69.89% Corporates 12.11% 10.31% 61.21% 9.72% 11.35% 10.45% 4. NSE Bond Futures II Corporates 24.77% 15.89% % 20.40% 18.63% 18.89% DII 2.07% 1.71% % 2.58% 1.82% 2.07% FII 1.33% 5.57% % 2.97% 4.26% 3.78% Others 5.92% 4.92% % 4.45% 5.23% 5.20% PRO 65.91% 71.91% % 69.60% 70.05% 70.05% Corporates 24.77% 15.89% % 20.40% 18.63% 18.89% 10

12 Asset Category wise Open Interest 1. Equity Derivatives FUTSTK % OPTSTK % Equity Derivatives - Index Futures BANKNIFTY % NIFTY % NIFTYCPSE NIFTYINFRA NIFTYIT % NIFTYPSE Equity Derivatives - Index Options BANKNIFTY % NIFTY % NIFTYCPSE NIFTYINFRA NIFTYIT NIFTYPSE Currency Derivatives- Futures EURINR % EURUSD % GBPINR % GBPUSD % JPYINR % USDINR % USDJPY %

13 5. Currency Derivatives- Options EURINR % EURUSD % GBPINR % GBPUSD JPYINR % USDINR % USDJPY NSE Bond Futures II 668GS % GS % GS GS GS % GS GS Internet Based Trading Turnover 1. Equity Market Cash market % Equity Derivatives Currency Derivatives % NBFII % Record Statistics Instrument Turnover Rs. Crs Turnover USD Mn Date Index Futures , September, 2016 Stock Futures , January, 2018 Index Options Premium , February, 2018 Stock Options Premium , October, 2017 Equity Turnover , May,

14 Important Links Mode of Trading Cash Market - Mode of Trading Equity Derivative Market Disclaimer: Market conditions can lead to substantial profit or loss. Investors are advised to seek adequate product and market knowledge as well as proper investment advice before trading. The material provided here is for general information purposes only. While care has been taken to ensure accuracy, the information furnished to reader with no warranty as to accuracy or completeness of its contents and on condition that any changes, omissions or errors shall not be made the basis for any claim, demand or cause for action. 13