>> Arbitrageurs make a killing on yield differentials
>> FIIs turn bearish on Nifty, Bank Nifty in weak signals
>> Overseas investors cut rupee bets
>> JP bankruptcy resolution process is stuck over land offers
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.
The trade setup on Dalal Street looked strong this morning, as Nifty futures on Singapore Exchange traded some 25 points higher ahead of the opening of Indian markets. Stocks opened in the green in other Asian markets. US indices ended lower overnight, as investors awaited cues from the forthcoming corporate earnings season and a key inflation report due later this week. Bond yields rose slightly after the US Treasury’s auctions of three- and 10-year notes attracted decent demand. In currencies, the rupee suffered from some sharp weakness on Monday, ending below the 75-to-the-dollar mark for the first time in eight months. The dollar hovered near a three-week low against major rivals. Bitcoin climbed back above $60,000 ahead of a listing by the largest US cryptocurrency exchange. Crude oil edged up to hover near the $60 a barrel mark.
That said, here’s what else is making news.
Arbitrageurs are making a killing on bond yield differentials, as three 10-year sovereign papers, including the benchmark, are yielding spreads up to 49 basis points among themselves. That has created a window of opportunity for quant experts on bond desks. Unless the wrinkles are ironed out, the differential will continue to yield a potential trading opportunity between on-the-run and off-the-run sovereign bonds – all maturing in 2030.
FIIs have turned cumulatively bearish on futures contracts of both Nifty and Bank Nifty for the first time in five months, signalling their cautious approach amid surging Covid cases in India. Yesterday, they squared off 16,699 long contracts while adding fresh shorts of 219 contracts amid a 3.5% fall in Nifty. Taken together with the fact that they’ve net sold a provisional Rs 3,094 crore in the cash market so far this month, analysts called it a sign of “bearishness”.
Hedge funds and overseas institutions, which have been counting on a robust rebound in India’s growth and comfortable forex reserves to take large bets on the rupee in offshore markets, pared their positions on Monday amid a deadly Covid-19 second wave and a looming lockdown in the country’s financial capital. As they unwound long rupee-short dollar bets, the domestic unit slipped below the psychological level of 75 against the US currency and drove RBI to sell dollars in the spot and derivative markets.
The bankruptcy resolution process of Jaypee Infratech has gotten stuck as the lenders expressed discomfort with both bidders — Suraksha ARC and NBCC — offering land instead of cash as part of the resolution plan. Both the bidders have offered 2,000 acres of Jaypee’s land around Noida where the project is situated. Lenders say they cannot take possession of such a huge land parcel as liquidating it will be tough.
Lastly, the risk of a second wave of Covid-19 across the country may accelerate investors’ money allocations to international mutual funds. Financial advisers are recommending clients to hold 10-20% of their portfolios in international equities as a hedge against the vagaries of the domestic market. Global funds invest in companies with exposure to larger markets, with cheaper access to capital and with cheaper valuations compared to their Indian peers.
NOW Before I go, here is a look at some of the stocks buzzing this morning.
Vodafone Idea said it would clear its remaining licence fee dues with interest for the fourth quarter of the previous fiscal by April 15.
ONGC has sought bids for the sale of 2 million metric standard cubic meters a day of natural gas from the KG Basin.
Coforge has agreed to acquire a 60% stake in SLK Global Solutions for Rs 918.32 crore, in a deal that the IT firm expects will help it expand services to the North American financial services industry.
Sebi has imposed a Rs 25 crore fine on Yes Bank after the regulator found that the bank’s wealth management wing had missold AT1 (perpetual) bonds to investors, hiding the associated risks.
Do also check out over two dozen stock recommendations for today’s trade from top analysts on ETMarkets.com.
That’s it for now. Stay put with us for all the market news through the day. Happy investing!