Is Young Money, Dumb Money?
Edition #4
Welcome back! We’re glad to present 4th edition of Beyond Markets! We’re going to be talking about games and glory! From speculative betting to efficient use of capital we have got it all!
Topics:
Events this week:
9/10 ‘traders’ spoil the FNO party
Remember when the whole class got punished for the mistakes of a few? That’s how genuine traders might feel right now. Traders follow strict rules and risk management frameworks, but the term 'trader' has become misunderstood with the influx of young money. Those making losses are simply speculators.
Speculators have outnumbered traders; they aren't buying options—they're buying lottery tickets! SEBI is doing what they should: protecting investor money. Whether investors, traders, or speculators, all investor money must be safeguarded.
It's the traders and brokers who suffer because they can't just wind up operations. For many professional traders, this is their livelihood, and they must bear the costs. Initial rumblings suggest reducing the number of expiries in the week and increasing lot sizes and charges, making it costlier to trade options. This will hit exchanges hard, which have spread expiries across the week and reduced lot sizes to increase participation in options.
Data: Indian F&O Market by Trading Volume and Turnover
To put things into perspective, Brazil’s B3 saw a little over 692 million contracts traded in April, ranking 3rd behind NSE and BSE. With these stats, and reports that 9/10 traders are losing money in options, it flips the narrative.
We should not celebrate these volumes because 90% of participants are actually losing money. Speculators have turned the F&O market into a playground, making it imperative for SEBI to implement stricter regulations to protect all investors.
Birla Opus: A Splashy New Entry in the Paints Market!
Remember the buzz on February 22, 2024, when the Aditya Birla Group announced their grand entry into the paint industry? Headlines screamed, “Aditya Birla Group set to disrupt Paint industry with 40% addition to Industry Capacity” and “Grasim’s Birla Opus targets ₹10,000cr in revenue within 3 years.” They weren’t just dipping their toes but diving in with a colossal ₹10,000cr investment. Their ambitious goal? To add a whopping 40% capacity to the industry and rake in ₹10,000cr in revenue within three years. Talk about setting the bar high!
Why this topic now? We recently spotted Birla Opus’s new hoardings and swanky stores popping up across South Mumbai. It hit us—didn’t they just announce this a few months ago? The speed at which they’ve moved is incredible. In less than six months, Birla Opus hoardings and store outlets are already up and running.
Speedy Rollout and Strategic Moves
Grasim Industries, the powerhouse behind Birla Opus, has already kick-started production at three plants in Haryana, Punjab, and Tamil Nadu. And they’re not stopping there. Three more plants are scheduled to come online in Karnataka, Maharashtra, and West Bengal throughout FY25. With an initial capacity of 1.33 million kilolitres and plans to expand further, they’re not just joining the market—they're aiming to dominate it.
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Price is King
This strategic move allows them to leverage Grasim’s existing distribution network and focus on innovative tinting technology. The paint sector isn’t new to competition, but Birla Opus’s pricing has already made waves. Most paint stocks fell after the announcement and are still trading lower. Asian Paints is down over 3%, Berger Paints over 10%, and Kansai Nerolac over 12%. (Price as on 9th July ’24)
A New Era for the Paints Industry?
Analysts are calling this the ‘Jio moment' for the paint sector. With massive financial backing and rapid market penetration, Birla Opus is set to challenge the status quo. Asian Paints and other established players, with their decades of brand loyalty and market dominance, will undoubtedly feel the heat from this new, aggressive competitor.
Kudos to their execution! We’re excited to see how this competition flourishes in the future.
FII Investment Activity: Is the Money Flowing Back?
Foreign Institutional Investors (FIIs) have largely been net sellers in India's various segments since the start of 2024. Here's a quick overview of their activity in the cash segment and derivatives market:
Cash Segment:
In June we saw a net purchase of ₹35,284.1crs, in the Index futures indicating a positive trend. Mixed activity with slight net sales in June and July have been seen in Stock Futures and Options.
Despite the earlier trend of selling, FIIs have turned net buyers in the cash segment recently. In June and July (so far), we see positive net purchases. This shift suggests that FII money might be making a comeback.
Is FII Money Coming Back?
Yes, there are signs that FII money is starting to return to India. The net purchases in the cash segment over the last two months indicate a potential positive shift. But to say that FIIs Are truly back we would need to see sustained net purchases over several months, reversing the net selling trend observed earlier in the year. Consistent positive inflows and a significant increase in net investments would signal a strong FII return.
In summary, while it's early to declare a full-fledged return, the recent data is promising. Let's keep an eye on the upcoming months to see if this positive trend continues.
Infotrend: Indices
Indian markets have proven their strength over time, with Nifty, BankNifty, Midcap, and Smallcap indices showing impressive growth since their inception.
Bonus: Here is a list of 52 stocks curated by Rahul Sharma and his team at JM Financial Services. The list has 26 stocks with further upside potential and 26 others where they advice partial profit booking.
Please note: The report was released on 30th June 2024
You can watch the full video here: KALKI 2024AD.
That's all for this edition of Beyond Markets by blinkX! Let us know in the comments what you think and what would you like us to cover in the next edition? Have a great week!
Financial Content & Communication at BlinkX by JM | CMT L1 Candidate | NISM - VIII | Equity Research | Investor | Machine Learning | Prompt Engineering
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