ETMarkets Morning Podcast: Look who is cashing in on reverse arbitrage | The Economic Times Markets Podcast

ETMarkets Morning Podcast: Look who is cashing in on reverse arbitrage | The Economic Times Markets Podcast

Good Morning.

>> Hedge fund blowup leaves investors rattled
>> Jhunjhunwala-backed Nazara set for solid listing
>> HNIs, DIIs try to cash in on reverse arbitrage
>> Peak margin rule hits volume as day traders shift to options

Hi there. Welcome to ETMarkets Morning, the show about money, business and markets. I am Sandeep Singh.

Let’s start with a quick glance on the state of the markets.

A blowup in a top hedge fund is rattling financial markets, as it has raised fears of a possible contagion. But a flat closing for US stocks overnight has eased those concerns some bit. Stocks fluctuated in most Asian markets in early trade this morning, while Nifty futures trading on the Singapore Exchange hinted at gains ahead for Dalal Street. In currencies, the dollar held gains, while the yen traded at its weakest levels in a year. In bonds, the 10-year US Treasury yields rose back above 1.70%. Oil climbed to the highest in almost two weeks despite the reopening of the Suez Canal, as traders looked to this week’s OPEC+ meeting, amid speculation that renewed demand concerns will push the group to keep production in check.

That said, here’s what else is making news.
Turmoil at Archegos Capital Management, the investment firm of former hedge fund manager Bill Hwang, is rattling financial markets around the globe. Shares in some of the world’s largest banks plunged in Monday’s trade: Both Nomura Holdings and Credit Suisse fell more than 14% and said they may face significant losses because of their exposure to wrong-way bets by hedge fund, following the forced liquidation of over $20 billion in positions linked to the New York-based family office. US stocks retreated from all-time highs as traders weighed the level of contagion.

Back home, ace investor Rakesh Jhunjhunwala-led Nazara Technologies looks set for a bumper listing on the bourses today. Unlisted shares of the mobile gaming company traded at a 71 per cent premium over its IPO issue price in the grey market a day ahead of its listing, indicating a good listing pop. It’s the first gaming company to list in India and Big Bull Rakesh Jhunjhunwala holds a 10.82 per cent stake it in. Jhunjhunwala did not participate in the Rs 583 crore offer for sale that took place from the 17th to 19th of March.

Rich traders and some of the DIIs are trying to cash in on a reverse arbitrage opportunity on Dalal Street. FII purchases of index futures in the past two days to partly offset their cash market sales amid a surge in Covid cases in India have driven Nifty spot-to-futures premium to a two-year high of over a 100 points. That has created the risk-free reverse arbitrage opportunity, which HNIs and domestic institutions are trying to grab. Reverse arbitrage involves selling a futures contract and buying cash shares in the expectation of a narrowing of spot futures premium. This premium is normally in a 30-35 point range and the spread is sold for gain. Some rich clients and DIIs have begun selling Nifty futures and buying cash shares of index companies to profit from a narrowing spread.

In a move to reduce information asymmetry, Sebi has stipulated companies to publish the audio/video recording of analyst meetings within 24 hours or before the market opens, whichever is earlier, on their websites and to stock exchanges. The companies will also have to upload a written transcript of the meeting within five days. Some say the step may have implications on the disbursal of information in analyst calls.

Sebi’s new framework on peak margin requirements appears to have affected the volumes in cash and future segments, with the options market gaining at the expense of the former. The average daily volumes of cash and futures segments on both the exchange have declined19% and13% in March, respectively, compared with February: By contrast, volumes in the option segment in March increased 16% and 39% over January.


Franklin Templeton has tapped diplomatic channels seeking a “just and fair” hearing by Sebi in the ongoing regulatory and legal proceedings involving liquidation of the asset manager’s six debt schemes in the country. “If we are hit with unfairly large penalties — whether by fine or disgorgement — that not only would discriminate against a major US-based global investment manager, it also would cause us to cut jobs and otherwise pull back our Indian operations,” Franklin Templeton’s global CEO and president Jennifer M Johnson said in a note to the Indian ambassador in Washington.

NOW Before I go, here is a look at some of the stocks buzzing this morning…

· Piramal Capital & Housing Finance, which is set to acquire DHFL, will likely put on sale the latter’s property developer loan portfolio of about Rs 53,165 crore as it moves toward becoming a retail mortgage lender.

· The government has received multiple expressions of interest for its proposed divestment in Neelachal Ispat Nigam, tweeted Dipam.

· IDBI Bank plans to ramp up growth, regain lost corporate customers and sell stakes in its insurance, capital markets and technology arms following its exit from the banking regulator’s PCA framework for weak lenders.

· The stock of microlender CreditAccess Grameen has lost 15% over the past three months amid concern over its third-quarter net loss following higher provisioning towards expected credit loss.

Do also check out over two dozen stock recommendations for today’s trade from top analysts on

That’s it for now. Stay put with us for all the market news through the day. Happy investing!

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