Short Call | Emkay Global, Titagarh Wagons shine amid option sellers’ woes

Similarly, Zerodha has recently partnered with Small Case for mutual fund products. However, it remains to be seen if Emkay's new license will be a game-changer for the firm. The days of the SIP rush, which fueled the rally in AMC shares in 2021, have long gone.

Debt funds too have lost some of their sheen after the recent tweaks in rules relating to taxation and indexation. One reason for AMC stocks’ continued underperformance is that investors are worried about more regulations that could squeeze profitability. It's possible that Emkay's investors are getting overly excited too soon.

Titagarh Wagons

Around 6.5 percent of the company’s equity got traded on the NSE on Thursday as the stock surged 10 percent. Titagarh is now emerging as the flagbearer of sorts for the railway sector. The company’s financial performance has improved over the last couple of quarters, and the stock price has more than trebled over the last nine months, but domestic institutional investors are not yet biting.

Till some time back, endorsement by FIIs could change the fortunes for a stock. But after the Adani episode, it is the domestic institutional players’ judgement that is taken more seriously. Wealthy traders who have taken up positions in the stock are said to be trying hard to sell the story.

Out of money

Traders selling options are finding it hard to make money because of a steady fall in the India Volatility Index (VIX). Options premiums tend to increase with higher volatility, reflecting the higher risk involved. The reason behind the current low level of the VIX, is unclear. Some attribute it to lack of market participation.

Whatever the cause, the impact is evident. Ankush Bajaj, a manual trader from Chhattisgarh said he has cut back on his trades because of the low premium. A similar view is echoed by Singapore-based Ashish Gupta, also a manual trader.

"Since the volatility risk premium is not there, it is a difficult time right now," Gupta told Short Call. Algo traders continue in auto-pilot mode, hoping the trend will change sooner than later.

No misuse, please

The NSE has finally woken up to the practice of some market participants using the stock exchange’s price feeds for gaming and virtual trading purposes. Brokers say some trading members resell NSE data to dabba traders who use it for unauthorized trading apps quite popular with amateur traders looking for a high.

“All Trading Members are hereby advised that the use of NSE data is only for legitimate trading purposes by their clients and not for the purpose of gaming and virtual trading,” the NSE circular said. Interestingly, the circular does not mention the action that can be taken against the members if they use NSE data for illegitimate trading purposes.

In January this year, Moneycontrol had done a detailed piece on the proliferation of unauthorised trading apps. You can read it here:

Overheard

While market conditions have become tough and the queue of new customers has shortened considerably, it is not all gloom in the broking industry.  One of the top domestic broking firms which is also a big name in the wealth management business is said to have flow down a few hundred of its staff for an offsite in Baku, Azerbaijan.

US housing

Home sales fell across the US in March as rising home loan rates deterred buyers, reports the Wall Street Journal.

“The housing market’s slowdown is now starting to weigh on prices, which have fallen on an annual basis for two consecutive months for the first time in 11 years. A cooling economy, with stubbornly high inflation and the prospect of recession in the next 12 months, is keeping some buyers on the sidelines. Consumers also borrowed less following the collapse last month of Silicon Valley Bank and Signature Bank, a Federal Reserve report said Wednesday.”

China realty

Commodity bulls betting on a recovery in China’s real estate sector may need to temper their expectations. Chinese hedge fund Shanghai Bull Asset Management, which last year made a 523 percent return on its bets on bonds of distressed property developers, is trimming its positions,  concerned by the sector’s debt burden, reports Bloomberg.

“The prevalence of caution from top-performing fund managers comes despite early signs of stabilization in real estate, a key industry that policymakers are trying to support to revive the economy. “An industry-wide recovery won’t happen any time soon,” said Bull Asset Chief Investment Officer Shi Yafei, who helps oversee more than 1 billion yuan ($146 million).

FTA bouncer for Credit Suisse?

The Credit Suisse-UBS saga continues to throw up surprises. The latest one comes from Singapore, where investors are preparing to sue the Swiss government for its decision to write down $17 billion of Credit Suisse’s AT1 bonds, FT reports.

The bondholders say the writedown was in violation of protections under the Singapore-European Free Trade Association signed with Switzerland in 2003. The case can also inspire copycat lawsuits from other parts of Asia, though some legal experts said it would be best for investors not to get their hopes up too high.

BMW’s ice-cream soup

Call it a storm in a sundae cup. BMW found itself in the firing line in China after an ice-cream giveaway promotion backfired at the Shanghai auto show. Chinese netizens pounced on the German auto giant after a viral video showed workers at its Mini booth telling some local visitors that the free ice-cream had run out, but moments later offered some to a Western guest.

The West’s high-handedness (both real and imagined) is an extremely prickly topic in China, and many brands have had to issue hasty mea culpas to ensure they are not kicked out of the lucrative market. BMW too has apologised for the incident, but when will the raging firestorm on China’s Weibo die out? Perhaps before hell freezes over.

Interesting reads

“I still detest the term EBITDA which, in my opinion, for all practical purposes, is quite useless while assessing the financial strength of a business,” Pulak Prasad, Nalanda Capital, said in an interview with Jason Hartman.

Trader blogger Nooresh Merani has compiled data showing how foreign institutional investors have been reduced to bit players in the burgeoning options market and has also cautioned retail traders about the pitfalls they need to be wary of. Read his Twitter thread here:

Shailaja Mohapatra, Shubham Raj and Abhishek Mukherjee contributed to this piece