MARKET REVIEW FOR PAST HALF YEAR

TOP EVENTS THAT SHOOK INDIAN MARKETS IN THE PAST 6 MONTHS NDA'S THUMPING VICTORY

Market got a major boost from the exit polls and results of the general elections. After the exit polls, the Nifty rallied 3.7% giving a clear mandate to the BJP government. BJP won 303 of the 543 seats on its own and that brought an end to political uncertainty and instilled confidence among investors on continuity of reforms. After rallying about 10% so far in the year 2019 market might take a breather till the full budget, which will be presented on July 5. there is a high probability that markets could make a top and then tread in a range till the Budget as Nifty is trading at extremely high valuations with upwards of 29x PE on the higher end of the band.

RBI CUTS POLICY RATES

Reserve Bank of India (RBI) in its policy review meeting on June 6 expectedly cut repo rate by 25 bps and changed its policy stance from neutral to accommodative citing growth concerns. This marked the third rate cut of the year so far. RBI is likely to cut interest rates by another 25 basis points in 2019 due to weak growth momentum and inflation remaining within targeted limits, Fitch Ratings said. Many other analysts also echoed this opinion. the repo rate cut was broadly in line with expectations. The shift in gear from neutral to accommodative removes ambiguity with respect to the direction of rate action, she added.However, the central bank has not mentioned any special package for NBFCs barring the appointment of the working group to look at liquidity problem.

THE JET AIRWAYS SAGA

Shares of cash-strapped airline remained under pressure as the company was forced to suspend its operations and finally was taken to the NCLT by its lenders. On June 20, 2019 the share hit record low of Rs 27 after State Bank of India filed insolvency petition against the company to recover dues. Country's largest lender State Bank of India approached National Company Law Tribunal in Mumbai against cash-strapped Jet Airways on behalf of the consortium of lenders. Jet Airways shares lost more than 80 percent in the last six months.

FUTURE VS OPTION

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Here we attempt to explain basic difference between Future and Option Contracts

Premium

While you pay a fee called the "premium" when buying stock options, there are no premiums to be paid in a futures contract. The initial amount of money (known as "Initial Margin") paid when you buy a futures contract is a fraction of the price paid for the underlying stock. While writing options you receive premium.

Obligations

Buyers of stock options are not obligated to exercise the rights to buy the underlying stock at all while buyers of futures contracts  or option writers are obligated  settle difference with cash market and pay mark to mark daily.

Liability

Buyers of futures contracts  and option writers are exposed to unlimited liability should prices move against them while buyers of stock options lose only the amount of money used to purchase those stock options.

Expiration

Buyers of futures contracts can carry forward  their position by selling current month contract and buying next month or vice versa. Options expire worthless if the options are out of the money.

Versatility