Welcome to Samosa Capital’s evening briefing — the best way to stay up-to-date on India’s financial markets. Here’s what’s in today’s newsletter:

• SEBI’s crackdown on options seems to be working,

• Inflation comes down,

• And, India secures major foreign players to enter its rupee trading market.

Finally, we’ll close with Gupshup, a round-up of the most important headlines.

If you have feedback on our newsletter or just want to chat about India, always feel free to reach out to me. You can also share criticism about the newsletter anonymously here.

—Shreyas, [email protected]

Market Update

Benchmark indices closed down 0.42 percent on the news of November’s CPI print coming in at 5.5 percent y-o-y, an improvement from October’s 6 percent. Bonds stayed flat while the rupee stayed relatively flat.

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Goodbye, Insane Indian Options Bull Run

What happened: Last month, SEBI instituted new regulations to cool options trading after it was revealed that 93 percent of retail traders were losing money on such speculative trades. Now, we have evidence the regulation is working: options trade volume is down 90 percent since all-time highs in January 2024. The era of India being home to ~90 percent of all options traded and executed globally is now in the rear-view mirror.

Trading volume is down 30 percent in the week ending December 6th alone, the first week under the most recent SEBI regulations.

The new rules: SEBI introduced two new regulations: discontinuing the volatile weekly Nifty contracts and tripling the capital requirement for maintaining an options trading account.

Who gets hurt: For the National Stock Exchange and BSE, the two largest clearing houses, this means a huge drop in premiums: the dollar-traded amount of options is down 50 percent since the January high.

Inflation Finally Starts to Ease

November’s CPI print came in at 5.38 percent y-o-y, a much-needed drop from October’s 6.21 percent. While the RBI’s target is 4 percent with a band of +/-2 percent, the central bank will continue to take a hawkish approach to inflation.

It’s the food, stupid: Food makes up half of the consumer basket and rose 9.04 percent y-o-y, down slightly from October’s 10+ percent reading. Particularly, vegetables are up 29.13 percent. Compare this to core inflation, which stayed flat at 3.72 percent y-o-y, well within the RBI’s ideal range. As Samosa Capital, top Indian economic advisors, and Bloomberg columnists have argued, India overweights food in its basket of goods, an artifact from how Indians spent their paychecks 20-30 years ago. Additionally, the RBI can do little to control food inflation, which is largely driven by government quota and export/import controls, along with the level of rainfall during the monsoon season.

Welcome to Indian Rupee Trading, Morgan Stanley

Welcome, Nomura and Morgan Stanley: Both major banks are set to launch market-making services in India, becoming the first foreign entities to enter this space. Currency market-making facilitates seamless currency trading and global oil transactions by ensuring smoother execution.

It’s about time: Although the RBI approved their entry into India two years ago, these banks are the first to internally greenlight the service and initiate the rollout of required operations. India’s inclusion into global bond indices (JP Morgan and FTSE Russell) plus increased markets trading, foreign direct investment, and export/import balances have led to more transactions happening in rupees and the need for international players to offer high-end institutional service.

But... The RBI has stringent rules that foreign entities have to follow. Some of them include daily reporting on what transactions took place plus the notional amounts exchanged, high margin requirements, and logical charts depicting the chain of management.

Gupshup

Macro

• RBI’s FX intervention to protect Indian currency was challenged by foreign outflows and declining FX reserves. FDI has been hampered by weak corporate earnings, while the RBI’s FX reserves hit a five-month low after a $38 billion (₹3.2 trillion) sale to buoy the rupee.  

• SEBI aims to level the field by allowing retail investors access to algorithmic trading through stock brokers. With algos driving 97% of foreign investors' futures and options profits, SEBI is reviewing a proposal to let retail traders register and use them on exchanges.

• Rosneft and Reliance agree on the largest ever Russia-India oil supply deal ever. Rosneft has agreed to supply oil for the next 10 years, representing a whopping 0.5 percent of all global supply. The deal is worth $13 billion (₹1.1 trillion) in current terms and stipulates that Rosneft will deliver 80,000 to 100,000 metric tons of various Russian crude grades and another 100,000 tons of fuel oil each month. 

• India's industrial output rises 3.5% y-o-y for October, representing a 3-month high. The uptick was primarily driven by increased consumer demand for durable goods and garments during the holiday season. Bank analysts expect this trend to persist as the festive season extends into winter.

Equities

• Vishal Mega Mart's IPO draws bids for $19 billion (₹1.6 trillion). Institutional buyers are oversubscribed by 81 times while retail traders are only 2.3x. Vishal Mega Mart is a budget retailer selling clothes for as cheap as $1 or 100 rupees.

• The MobiKwik IPO received bids worth $4.7 billion (₹399 billion), indicating strong demand with a 120x oversubscription driven by optimism about the fintech market in 2025. MobiKwik also facilitates financial payments and transfers between parties.

Alts

• Aviva, the British insurer, has been hit with penalties for using fake payments of $26 million (₹2.2 trillion) to justify commission payments that exceeded regulatory caps. New documents from India’s Insurance Regulatory body reveal the involvement of 8 senior Indian officials in the scheme.

• Reliance Industries buys a 74 percent stake in Navi Mumbai for $192 million (₹16.3 billion), with the rest owned by the Maharashtra Development Authority. 

• RBI interventions have led to rupee forward curve distortion. When the RBI sells dollars in the spot market, it neutralizes the rupee liquidity drain by buying and selling dollars in the forward market. This ensures rupees remain available for banks while maintaining rupee strength. Typically, forward premiums are higher for longer maturities, but recent trading by the RBI has caused an inversion due to its use of shorter-term forwards.

Policy

• Samsung accused the Competition Commission of India (CCI) of an unlawful data raid. In August, the CCI accused Samsung and other phone manufacturers of colluding with Amazon and Flipkart to exclusively launch products online. Samsung responded by claiming that the CCI unlawfully detained and searched three employees during a 2022 investigation.

• India-UK trade talks will resume at the end of January after they were paused earlier this year in March due to Indian elections. Key issues include high import duties on British alcohol in India and Delhi’s demand for more student visas.

See you Monday.

Written by Yash Tibrewal. Edited by Shreyas Sinha.

Disclaimer: This is not financial advice or recommendation for any investment. The Content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice.