Currency derivatives volume jumps 67% in April-May to Rs 11.6 tn

The currency derivatives space has been on a song with the turnover surging by a whopping 67 per cent to about Rs 11.60 trillion in the first two months of the current fiscal over the year-ago period.

In April-May period last fiscal, the currency derivatives turnover on the bourses--NSE, BSE and MSEI (Metropolitan Stock Exchange)--stood at just Rs 7 trillion.

The number of contracts also jumped 56 per cent during the period to 17.57 crore.

The currency derivatives turnover in April this year stood at Rs 5. 62 trillion, while the May volume rose to Rs 5.97 trillion.

Going by the latest data, the turnover has increased manifold on both the NSE and the BSE, but has declined on the MSEI (formerly known as MCX-SX), for the period under review.

The NSE's turnover rose by over 67 per cent to Rs 6.18 trillion during the reporting period over the same period a year ago.

Though the BSE volume jumped over two-times, in absolute terms, it was below NSE's, at Rs 4.68 trillion.
On the other hand, turnover on the MSEI dipped to Rs 73,638.12 crore in first two months of 2015-16 from Rs 1.39 trillion.

Besides, the number of currency derivatives contracts traded on the exchanges also surged by nearly 56 per cent to 17.57 crore for the period under review.

While the number of contracts on the NSE stood at 9.57 crore, the same for the BSE and MSEI stood at 7.38 crore and 61.42 lakh, respectively.

Currency derivatives contracts allow investors to take position on change in the forex rates between pairs of two currencies, such as the rupee and the dollar.

RBI seen cutting rates for third time this year

The Reserve Bank of India is set to cut interest rates on Tuesday for the third time this year as inflation has eased enough to allow the central bank to provide more help for an economy seen struggling with patchy economic growth.

India is the fastest-growing major economy in the world, outstripping China, but economists say the data is not consistent with other indicators showing slack in Asia`s third largest economy. 

A Reuters poll showed 35 of 48 economists expected the RBI to cut the repo lending rate by a quarter percentage point to 7.25 percent after lowering it by the same amount in January and again in March. Three expected a 50 basis point cut.

A rate cut would need to be accompanied by steps to boost liquidity, according to bankers who say tight cash conditions are preventing them from lowering lending rates.

Still, the RBI could temper any action with measured language, given concerns about lower-than-expected rainfall in the monsoon season and uncertainty about when the U.S. Federal Reserve will start raising interest rates.

The RBI has also made rate cuts contingent on government action to deliver substantial reforms, such as fixing the country`s creaky infrastructure. That has sparked uncertainty now that Prime Minister Narendra Modi`s administration is struggling to pass major measures through parliament.

"We expect the RBI to cut the repo rate by 25 basis points, but the tone of the statement will be cautious on the inflation trajectory," said Soumya Kanti Ghosh, State Bank of India`s chief economic adviser.

Since the RBI held rates steady at its last policy review in early April, consumer price inflation has eased to a four-month low of 4.87 percent, in line with the RBI`s mid-term targets.

Analysts argue inflation data should give the RBI enough comfort to cut rates again and reverse the three rate hikes delivered by Governor Raghuram Rajan from September 2013 to January 2014 when India was suffering from double-digit inflation.

Instead, economists say bolstering growth should become the bigger imperative given dismal corporate earnings, weak industrial activity, and an elusive recovery in bank credit.

India`s economy grew 7.5 percent in the January-March quarter from a year earlier - faster than China`s 7 percent expansion - but economists have raised questions about the accuracy of a new method to measure economic activity.

Further rate cuts would put India in a similar monetary path to China, which earlier this month cut interest rates for the third time in six months.

Bankers are also lobbying for smaller measures to free up cash in the financial system, including easing the amount of funds that must be locked up at the RBI every day. 

Rajan has expressed frustration that banks have yet to substantially cut their lending rates, disrupting monetary policy transmission.

Sensex edges up ahead of RBI meet; Sun Pharma caps gains

 The benchmark BSE Sensex Monday edged up by 20.55 points in volatile trade to 27,848.99 as consumer goods gained on hopes that RBI would cut interest rates this week but a slump in Sun Pharma restricted index's gains.

Sentiment remained upbeat after data showed Indian economy expanded 7.3 percent in 2014-15 and manufacturing activity kicked up in May.

RBI is scheduled to review its policy rates tomorrow.

"In reaction to improved GDP figure, equity markets, after flat start, inched higher in early trades...But cautiousness...Ahead of RBI monetary policy review capped upside in index," said Jayant Manglik, President of Retail Distribution at Religare Securities.

Sun Pharma tumbled 8.99 percent to close at Rs 878.95 after fourth quarter earnings came below market expectations.

In volatile movements, the 30-share BSE barometer rose to 27,959.43 in early trade on the back of positive GDP numbers for March quarter, but fell on profit-booking to intra-day's low of 27,737.58.
Finally, it ended 20.55 points or 0.07 percent higher at 27,848.99.

Sensex had gained 321.73 points in Friday's trade at the beginning of the June series in the derivatives segment.

Brokers said buying by funds and other participants to enlarge their portfolios ahead of the RBI's policy review due tomorrow buoyed the sentiment.

However, the 50-share NSE Nifty after rising to the day's high of 8,467.15, reacted to slump in Sun Pharma and slipped into the negative terrain and hit a low of 8,405.40 before settling 0.25 point, down at 8,433.40.

"Markets seemed to keenly wait for the rate cut. Few auto industry monthly sales data failed to cheer the street," said Gaurav Jain Director of Hem Securities.

Globally, equities finished mixed with Shanghai Composite and Hang Seng indexes rallying by 4.72 and 0.63 percent, respectively, while European stocks were marginally lower in their early trade. 

Foreign portfolio investors bought shares worth Rs 2,284.30 crore, while Domestic institutional investors sold shares worth Rs 2,267.88 crore on Friday as per data.

Among BSE sectoral indices, consumer durable surged by 1.97 percent, followed by realty 1.61 percent, consumer goods 1.04 percent, oil&gas 0.69 percent and power 0.38 percent. While healthcare tanked 2.81 percent.

Of 30-share Sensex pack, 16 ended higher and 13 finished lower, while SBI ended unchanged.

Major index gainers were L&T 3.03 percent, Reliance 2.76 percent, HUL 2.31 percent, Maruti 2.24 percent, Cipla 1.81 percent, Tata Power 1.81 percent, ITC 1.61 percent, NTPC 1.43 percent, Infosys 1.15 percent and BHEL 0.93 percent.

On the flip side, Sun Pharma plunged by 8.99 percent, followed by Bharti Airtel 2.12 percent, Tata Motors 1.96 percent, ONGC 1.79 percent and HDFC Bank 1.4 percent.

Total market breadth remained negative as 1,528 stocks closed lower, 1,210 finished higher and 116 ruled steady. The total turnover rose to Rs 2,699.25 crore from Rs 2,436.33 crore last Friday. 

HDFC MF remains most profitable fund house; Reliance MF 2nd

HDFC Mutual Fund has retained its position as the most profitable fund house in 2014-15, with a profit after tax (PAT) of Rs 416 crore, while rival Reliance MF remains at the second place.

According to an analysis of profit figures for fund houses available with industry body AMFI, HDFC MF, country's largest fund house, posted a PAT of Rs 416 crore for the full year ended March 31, 2015, while Reliance MF registered a PAT of Rs 357 crore during the last fiscal.

ICICI Prudential MF, the second largest fund house in terms of assets base, reported a profit after tax of Rs 247 crore, while Birla Sunlife MF posted a PAT of Rs 123 crore.

Reacting to the profit figures, Reliance MF CEO Sundeep Sikka said: "As a fund house we believe in balanced growth - both top line and bottom line - and this has helped us deliver better results and value to our stakeholders and investors. We will continue to work towards better returns for all our stakeholders."

On the assets under management (AUM) front, HDFC maintained its lead with assets base of Rs 1.46 lakh crore, followed by ICICI MF at Rs 1.32 lakh crore, Reliance MF at Rs 1.24 lakh crore and Birla Sunlife MF at Rs 1.07 lakh crore.

Interestingly, the difference in profit is significant despite the fact that all these MFs are at a striking distance when it comes to AUM with a difference of Rs 10,000 crore between the top three players.

"The huge difference in profitability of fund houses, despite little difference in the AUM, clearly spells out their focus and strategy. How can one explain that number two largest asset management company in AUM ? ICICI MF - is nearly half in profitability of HDFC MF or Birla MF is one third of Reliance MF profits.

"Clearly, the focus is on getting AUM at any cost, which is a short term strategy and may cost investors and stakeholders in the long run," sources said.