Latest news with #AndyMukherjee
Time of India
3 days ago
- Business
- Time of India
India's 50% tariff is actually a US sanction in disguise. Why that makes it worse
India's 50% tariff is actually a US sanction in disguise. Why that makes it worse Andy Mukherjee Bloomberg Aug 8, 2025, 17:42 IST The goal of the punitive tax is to get Putin to end the Ukraine war. If that objective is not realized, there's no guarantee of what Trump might do next to India, one of the world's biggest buyer of seaborne Russian crude Washington has taken its brinksmanship against New Delhi to a dangerous level. Doubling an already-high tariff of 25% is bad enough. What makes it worse for Prime Minister Narendra Modi is the language. US President Donald Trump has decided to call India's additional punishment for importing Russian oil a 'secondary' tariff, a made-up term that has a close cousin in the world of sanctions. Secondary sanctions impose a cost on third parties for allegedly enabling bad behaviour by someone else. If a US bank, port, ship, or company is prohibited from engaging in a transaction involving the Russian financial system, then a secondary sanction can make it potentially illegal for non-Americans, too.
Mint
28-07-2025
- Business
- Mint
Somnath Mukherjee: Sebi's Jane Street order was the canary our market needed
Arbitrage or market manipulation? Jane Street believes it is an uber-efficient arbitrageur. It spotted pricing anomalies between index options and the index's stock constituents, and used sophisticated trading models to profit from the arbitrage. The Securities and Exchange Board of India's (Sebi) order has some interesting findings. On 17 January 2024, the expiry day for Bank Nifty derivatives, the index opened 2% lower due to weak earnings of some of its constituents. However, options on the Bank Nifty traded at a level where the implied price was higher, resulting in an anomalous price spread. JS did what textbooks tell us: buy stocks that make up the Bank Nifty while selling options on this index. The trade worked as textbooks say it would: the spread narrowed within six minutes. But here's the twist: the total value of Bank Nifty stocks purchased was ₹572 crore while the total notional value of the options sold was ₹8,751 crore, which is more than 15 times. This oddity continued. By mid-day, JS had bought Bank Nifty stocks and futures worth over ₹5,000 crore and sold options worth over ₹30,000 crore. Arbitrage is about hedging, but one doesn't hedge a bet on India winning the Border-Gavaskar Trophy by placing 15 bets on India not-winning it. So JS started selling its stock/futures positions. But liquidity in these segments is so low that its trades tanked prices, resulting in losses for JS in its long index positions. But its large short options position (5-6 times in notional exposure to its cash/futures positions) got settled at market close at a massive profit. In short, JS appeared to move prices in the illiquid leg of the market (cash/futures) so that it could profit from its large position in the liquid leg (options). Also Read: Devina Mehra: How derivative dreams can turn into nightmares but still lure investors Arbitrage or manipulation? Either way, Sebi's order has acted as the proverbial canary in the coal mine to reveal potentially poisonous fumes in our capital markets. Fume 1—Lopsided market structure: India's equity market is the second largest among emerging economies by market capitalization and volumes both. However, volumes are skewed—over 90% are in derivatives (futures and options or F&O), with options accounting for the bulk. The cash segment is shallow. Daily volumes in the shares of HDFC Bank, the largest Bank Nifty constituent, for instance, are only about ₹2,000 crore. To put this in context, the total equity assets under management of India's mutual funds (MFs) are over ₹30 trillion, with ₹50-60,000 crore worth of flows every month. This skew causes distortions. Also Read: Andy Mukherjee: Jane Street's secret sauce for Indian markets should be tested out Fume 2—Skewed tax structure: A small ₹5,000 crore trade could move prices because there is no countervailing Indian entity that's able to provide liquidity by playing the other side of JS's 'arbitrage' trades. The reason is simple—tax rules. In India, the securities transaction tax (STT) on derivatives is a fraction of what it is on stocks, incentivizing investors to move to F&O from the cash segment. Further, foreign portfolio investors (FPIs) enjoy a large tax advantage over Indians. FPIs' F&O trades qualify for capital-gains tax (and are taxed at 20% if short-term and 12.5% if long-term), but for Indian entities, the same gains are deemed to be income (taxed at 25% for corporates and 39% for individuals/trusts). Fume 3—Regulation stifles Indian institutions: For many years, FPIs provided the dominant share of liquidity in Indian stock markets. Over the last decade, Indian institutions, especially MFs, have risen in stature and now account for a larger share of India's market capitalization and volumes than FPIs. This provides a diversified pool of liquidity in the cash segment. But in the F&O segment, a regulatory overhang prevents the creation of such counterweight liquidity. Why? Also Read: Jane Street: Gaming an outdated system is not necessarily illegal in India First, domestic institutional investors are mostly not allowed to use leverage, but FPIs are. Second, short-selling, which lets market participants act on bearish views, exists mostly in the realm of theory; its process is such that participation and liquidity are low. Third, a prudential aversion to leverage has left F&O trading as its only source. Bank lending to capital markets is heavily circumscribed and non-banking financial companies have limited capacity to lend. This reduces domestic market liquidity and pushes participants towards the F&O segment. Fourth, while there are all sorts of limits in equity markets, index options face none. This means participants can build positions in index options many times the stock position limits on the underlying stocks. Fifth, a very high proportion of market liquidity is concentrated in short-term options contracts. India is unique as a large market with zero liquidity in derivatives of more than three months tenor. Also Read: Sebi's Jane Street interim order made India's stock market sit up for good reason Solutions are within grasp: India's financial markets are world class. So are its regulators (think of Sebi and the Reserve Bank of India). Diversified liquidity is the lifeblood of any well-functioning market. Small tweaks in tax laws, alongside a rethink on the flexibility afforded to Indian institutions (especially MFs) would be a great fresh start. The appointment of market-makers for longer-dated derivatives is another idea that is well-tested in India; in the 1990s, RBI licensed a slew of primary dealers as market-makers for government bonds with great results. India's capital markets are valuable. Sebi has done its bit as the canary by highlighting emergent risks. It is time now to make space for fresh ideas so that the mine continues to prosper for India. These are the author's personal views. The author is chief investment officer of ASK Private Wealth.
Mint
16-07-2025
- Business
- Mint
Devina Mehra: How derivative dreams can turn into nightmares but still lure investors
We hear a lot about the Securities and Exchange Board of India's (Sebi) finding that about 93% of all participants in the futures and options (F&O) market lose money. Given the peculiarities of the human mind, everyone seems sure that they will be among the 7% who are winners. In this belief lies a business opportunity for those offering derivative training courses. Of course, anyone who has a magic wand that can make 1% everyday in financial markets can turn ₹1 crore into ₹20,000 crore in five years and has no economic reason to sell you a course for a few thousand rupees. But the point is not just that 93% lose money, it is who the losers and winners are. Sebi data is clear: those losing money are individuals and another category of 'others,' under which NRIs, trusts, etc, are clubbed. Those making money also are in two categories. One is of foreign portfolio investors and the other is called 'proprietary.' These are large Indian set-ups that are probably using algorithmic trading or some other systems to trade. Interestingly, there are only a few hundred players registered under the proprietary and foreign portfolio investor groups, whereas those in loser categories number almost 10 million. Also Read: Andy Mukherjee: Jane Street's secret sauce for Indian markets should be tested out My own October analysis based on Sebi data ( showed that the few who profit are mostly institutions or sophisticated players. Retail traders, especially those from non-metro, lower-income or less-educated backgrounds, are the worst hit. Let's not glorify outliers. Clearly, when you pit human traders against machines, especially highly sophisticated algorithms, it's an uneven fight. Even without manipulation, the odds are stacked against retail traders. You're playing a zero-sum game where the big guys have better tools, data and speed. Even when some make money, it's peanuts. NSE data shows that among retail traders whose trading activity was profitable, the median annual gain was just ₹60,000. That's less than what a gig job earns. Even the late Rakesh Jhunjhunwala, when asked, 'Why do you ask people not to trade when you yourself made your initial capital as a trader?" had said, 'I smoke but I tell my children not to." Plus, when people like him and other big names in the Indian market made their money through trading, it was a different time and place, with many market inefficiencies leaving opportunities to be exploited, including some simple ones like the differential in prices of the same stocks across exchanges. That is no longer the case, with sophisticated real-time trading systems in place. Also Read: Jane Street: Gaming an outdated system is not necessarily illegal in India However, the Jane Street issue goes deeper into actual manipulation. With most trading strategies, the bigger you become, the harder it is to get returns. In fact, most people in the trading or algorithm business talk in terms of limits on how much money a strategy can be used for. Unlimited money cannot be deployed in normal opportunities to exploit market inefficiencies. But Jane Street was not only making more money as its size grew, its strategy was dependent solely on its volumes being large enough to move the market. That's a red flag. The Sebi order shows how it might have used its size to extract unfair profits. The game's profitability increased with scale, which shouldn't be the case in a competitive market. Some people think that if norms are tightened on derivatives trading, it will reduce volumes. Whether or not that happens, it's clear that volumes do need to be curbed. Derivatives trading volumes in India, after peaking at 400 times the cash market, are still about 230 times—more than five times the ratio in any other market in the world. India's market capitalization is less than 5% of the world's but the country accounts for about 60% of global derivatives volumes. Now we get to the interesting part. The high trading volumes in derivatives is a profit gravy train that a range of players over and above the traders themselves will find hard to get off. The higher the trading volumes, the more the profits for stock brokers and tech platforms. Then, with stock exchanges being listed or nearly listed, there is profitability pressure on them, which makes it tempting for them to keep trading volumes high. This creates a conflict of interest, as stock exchanges are the first-level regulators in the market. In a Jane Street type of scenario, a handful of entities displaying a pattern of actions at particular times on certain days should have first been visible to stock exchanges. Also Read: Sebi's Jane Street interim order made India's stock market sit up for good reason Not just capital market participants, even government coffers have been boosted by F&O volumes. As I wrote during the budget in February: India's personal income tax mop-up is expected to grow 14.4% in 2025-26, faster than nominal GDP. Corporate tax and GST are expected to grow 10.5% and 10.9%, respectively, which is why the budget projects an acceleration in personal income tax collections despite a cut in tax rates. And while Sebi might be trying to curb speculation, the government appears to be banking on it. It is easy to blame the regulator for not acting quickly. But in any case of manipulation, a detailed case has to be built that withstands legal scrutiny. Action can rarely be taken in real time. The author is founder of First Global and author of 'Money, Myths and Mantras: The Ultimate Investment Guide'. Her X handle is @devinamehra
Bloomberg
08-07-2025
- Business
- Bloomberg
India's Richest Man Is Making a US Energy Bet
Billionaire Mukesh Ambani is pivoting his petrochemicals empire toward US ethane in a move to replace Chinese buyers, explains Bloomberg Opinion columnist Andy Mukherjee. (Source: Bloomberg)
Bloomberg
03-07-2025
- Politics
- Bloomberg
Would Mamdani Win in Gujarat? Probably Not.
Most voters in New York don't focus on Zohran Mamdani's Muslim identity. But in India, religion matters a lot in politics. So: Would Mamdani become mayor in Gujarat? Probably not, explains Bloomberg Opinion columnist Andy Mukherjee. (Source: Bloomberg)
