Blog

Advanced Hedging Techniques with Futures and Options

In the dynamic landscape of financial markets, managing portfolio risk has become an essential aspect of investment strategy. Hedging, particularly through futures and options, provides investors with a structured approach to safeguarding capital against price fluctuations.

The global growth in derivative trading underlines this trend. In 2023, futures and options contracts reached a record volume of 137 billion, with the Asia-Pacific region, and notably India, contributing significantly to this rise. This momentum reflects the increasing adoption of hedging instruments to navigate volatility and protect investment outcomes.

This guide outlines advanced techniques to hedge positions using futures and options—designed to help market participants mitigate exposure, preserve capital, and optimize returns.

What Is Hedging in Simple Terms?

Hedging is a strategic process of offsetting potential losses in one position by taking an opposing position in a related asset. Much like an insurance policy, it aims to reduce the financial impact of adverse price movements without necessarily seeking to generate profits from the hedge itself.

Why is Hedging Important?

In an unpredictable market, even the most well-planned investments can face sudden fluctuations. Hedging acts as a protective strategy that helps investors manage risks and safeguard their portfolios from unforeseen losses. Here’s why hedging plays a vital role in sound financial planning:

Protects Against Losses: Hedging helps limit potential losses caused by market volatility or sudden price changes.

Ensures Stability: It keeps your portfolio value stable during uncertain times.

Supports Long-Term Goals: Hedging allows investors to hold their positions for the long term without panic-selling.

Improves Confidence: By reducing downside risk, investors can make calmer, more informed decisions.

Acts as Insurance: Just like an insurance policy, it provides financial protection against unexpected market movements.

How to Hedge with Futures Contracts

Futures contracts are standardized agreements to buy or sell an asset at a predetermined price on a specified date. Their binding nature makes them a preferred choice for businesses and investors looking to stabilize costs or returns.

If you’re starting your trading journey, you can open an online demat account with a trusted broker like Findoc to access futures and options markets seamlessly.

1. Short Hedge (Selling Futures)

A short hedge involves selling a futures contract to protect against a possible decline in the price of an asset that one intends to sell in the future.

Use Case: A manufacturer expecting to sell copper in three months may enter a short futures position to lock in today’s prices and avoid losses from a potential market drop.

2. Long Hedge (Buying Futures)

A long hedge is implemented by buying futures contracts to secure the current price of an asset that is expected to be purchased later.

Use Case: An airline company anticipating a fuel purchase might go long on crude oil futures to protect against rising prices.

Examples: Let’s say you buy 500 shares of company A at ₹200 each, making your total investment ₹1,00,000. You are worried that the stock price may drop after the upcoming quarterly results. To protect yourself, you decide to hedge with futures by taking a short position.

You sell one futures contract at ₹202 per share.

If the stock price falls to ₹180, you lose ₹20 per share in the cash market (₹10,000 total).
But you gain ₹22 per share in the futures market (₹11,000 total).
Your net profit = ₹1,000, protecting your portfolio from major loss.

Benefits of Hedging Through Futures

Capital Efficiency: Futures require only a margin deposit, allowing traders to control large positions with limited capital.
High Liquidity: Futures markets are highly liquid, ensuring rapid execution and minimal price slippage.
Price Certainty: Futures enable precise cost forecasting, especially in industries reliant on commodities.
Versatility: Suitable for hedging interest rate, currency, and commodity exposures.

How to Hedge with Options Contracts

Options provide the right, but not the obligation, to buy or sell an asset at a specific price before the expiration date. This flexibility allows for more tailored risk management strategies compared to futures.

1. Call Options – Protecting Against Upside Risk

Call options grant the right to buy an asset at a specified strike price. They are typically used when an investor anticipates a price increase but prefers to limit downside risk.

Use Case: A fund manager might purchase a call option on the Nifty index to hedge against a potential market rally while preserving downside protection.

2. Put Options – Shielding from Downside Risk

Put options provide the right to sell an asset at a predetermined price. They are commonly used to protect long positions from potential losses.

Use Case: An investor holding a portfolio of banking stocks may buy put options on a banking index to safeguard against sector-specific declines.

Examples: Now, suppose you buy 1,000 shares of company B at ₹100 each, for a total of ₹1,00,000. To protect against possible decline, you purchase a put option at a premium of ₹5 per share with a strike price of ₹100.

If the stock price drops to ₹80, your cash market loss is ₹20,000.
But your put option gains ₹15 per share (₹15,000 total).
Your total loss = only ₹5,000 (the premium paid).
If the stock rises to ₹120, you ignore the option and keep your ₹20,000 gain, minus ₹5,000 premium — ending with a net profit of ₹15,000.

Advantages of Options-Based Hedging

Defined Risk Exposure: Maximum loss is limited to the premium paid for the option.
Strategic Flexibility: Options allow for numerous strategies tailored to various market views and risk appetites.
Volatility Management: They are particularly useful in managing exposure to sharp price movements.
No Obligation: Unlike futures, options do not bind the holder to exercise the contract, offering flexibility in execution.

Advanced Hedging Strategies in Futures and Options

Once you’re comfortable with the basics, these techniques offer more control and precision.

1. Spread Strategies

Spread trading involves simultaneously buying and selling related contracts to capitalize on the price differential while limiting overall exposure.

Bull Call Spread: Buy a lower strike call and sell a higher strike call when anticipating moderate upside.
Bear Put Spread: Buy a higher strike put and sell a lower strike put when expecting moderate downside.

2. Straddles and Strangles

These volatility-based strategies involve taking positions on both call and put options.

Straddle: Purchase both a call and a put at the same strike price—ideal for uncertain directional moves.
Strangle: Buy a call and a put with different strike prices—more cost-effective in highly volatile environments.

3. Delta Hedging

This dynamic strategy involves adjusting a portfolio’s exposure to make it delta-neutral, thereby insulating it from small price movements.

Example: If the delta of a portfolio is +0.5, selling underlying assets in proportion can help neutralize the position.

Also read: Top Ten Option Trading Strategies for Smarter Trades to strengthen your understanding of how options can be used strategically in different market conditions.

Difference Between Hedging with Futures vs. Options

Feature	Futures	Options
Obligation	Yes	No
Upfront Cost	Margin required	Premium only
Risk	High (can be unlimited)	Limited to premium
Flexibility	Low	High

Key Tips to Hedge Smarter

In volatile markets, successful trading isn’t just about spotting opportunities—it’s also about protecting your capital. Hedging is a vital risk management tool, but like any strategy, it requires precision, timing, and regular fine-tuning. A smart hedge isn’t just about limiting losses—it’s about optimizing returns while keeping risk exposure in check.

Whether you’re managing options, futures, or OTC derivatives, here are some key considerations that traders should keep in mind to implement hedging strategies more effectively and avoid common pitfalls:

Avoid Overhedging: Excessive hedging may erode profits rather than protect capital.
Monitor Liquidity: Always assess the liquidity of the instruments involved to avoid inefficiencies.
Account for Rolling Costs: When extending positions, factor in transaction and rollover costs.
Evaluate Counterparty Risk: Especially relevant for OTC derivatives.
Review Regularly: Hedging strategies should evolve based on market trends and portfolio adjustments.

Risks with Hedging

While hedging is an effective tool for managing risk, it is not without its challenges. Investors should understand the potential downsides before using hedging strategies, as improper execution can sometimes lead to higher costs or reduced returns. Here are some key risks to consider:

High Costs: Premiums and margin requirements can make hedging expensive.
Limited Profit Potential: While protecting against losses, hedging also caps potential profits.
Complex Strategies: Using futures and options requires market knowledge and continuous monitoring.
Market Timing Risk: Incorrect timing or misjudged hedge size can increase losses instead of reducing them.
Liquidity Risk: Some derivative contracts may not have enough buyers or sellers, making it harder to exit a trade quickly.

Final Thoughts

Hedging with futures and options isn’t about guessing market moves—it’s about protecting your money. When used well, these tools help you reduce risk, stabilize returns, and seize market opportunities even in turbulent times. Financial institutions and individual investors alike are increasingly leveraging these tools not only for protection but also for strategic positioning.

Need a hedging strategy that works in real-world markets?

Connect with Findoc to monitor live data, plan smart trades, and avoid costly errors. Take control of your portfolio today.

Frequently Asked Questions

1. What is a hedging technique?

Hedging is a strategy used to reduce financial risk by taking an opposite position in related assets, like futures or options, to offset possible losses.

2. How do you use F&O for hedging?

Investors use Futures and Options (F&O) to protect portfolios by buying or selling contracts that move opposite to their existing holdings.

3. Is option hedging profitable?

Option hedging limits losses but also restricts profits. It is more helpful in protecting investments than in making large gains.

4. How to hedge in Nifty futures?

You can hedge a portfolio by taking a short position in Nifty futures if you expect the overall market to fall, thereby reducing portfolio risk.

April 8, 2025

Why major FMCG companies in India are bracing for a weak Q4 performance

The March quarter of FY25 is likely to be a subdued one for India’s fast-moving consumer goods (FMCG) sector. Despite some outliers showing relative resilience, overall sector performance is expected to remain underwhelming, shaped by sluggish demand, inflationary pressure, and weak volume growth.
From muted urban sentiment to rising input costs, several headwinds are weighing on earnings potential, prompting investors and analysts to brace for a weak quarter. Here’s a breakdown of the key factors influencing this outlook.

1. Divergent Revenue Trends Across Players

Pre-earnings updates indicate a mixed performance across the sector. While some firms are expected to report double-digit revenue growth driven by stable segment performance and pricing tweaks, others have flagged only mid-single-digit growth due to muted demand trends and seasonal factors.
Revenue expectations vary significantly, with some firms projecting flattish consolidated performance, and others hinting at high-single-digit topline growth. Volume growth, however, is generally subdued, pointing to a fragile demand environment.

2. Demand Recovery Remains Elusive

Consumer demand, particularly in urban markets, continues to be under pressure. Factors such as low wage growth and persistent inflation have kept discretionary spending in check. Analysts note that overall demand levels in Q4 are largely in line with Q3, with no meaningful acceleration.
In rural areas, some improvement has been observed, aided by price rollbacks in staples and expanded distribution. Yet, the recovery appears fragile and largely driven by a low base effect. For the sector, a sustained and broad-based rural revival remains critical, given that rural India contributes over a third of total FMCG sales.

3. Margin Pressures Intensify

Profitability is expected to face headwinds in Q4. A reversal in commodity trends has led to input cost inflation, with key raw materials like crude oil, palm oil, coffee, and sugar witnessing sharp price hikes. This comes after a period of cost softness in previous quarters, when companies had cut prices and ramped up advertising.
As a result, gross margins are expected to contract or remain under pressure, especially for firms grappling with operating deleverage. Higher advertising and promotional spends to defend market share further constrain operating margins.
In some cases, shipping delays and rising freight costs—linked to global disruptions such as the Red Sea crisis—may also have a marginal impact on profitability.

4. Volume Growth Still Subdued

Volume trends continue to show weakness across major product categories. In several cases, volumes are expected to be flat or only marginally higher compared to the previous quarter, indicating that the sector’s recovery has yet to gather steam.
Even where modest revenue growth is expected, much of it is driven by minor price increases rather than an expansion in actual sales volumes. Certain categories such as tea, soaps, and household care remain under pressure, partly due to past pricing actions and changes in product pack sizes.

5. Cautious Optimism for the Road Ahead

While Q4 is expected to mark another muted performance, some analysts believe it could also represent the bottoming out of volume growth. A better rabi harvest, stable monsoon forecasts, and easing inflation could lay the groundwork for a gradual recovery in consumption during FY26.
However, any meaningful improvement is expected to be slow and staggered. Until demand picks up and companies regain pricing power, topline and margin expansion are likely to remain constrained.
The broader FMCG index has significantly underperformed the benchmark index over the past six months, reflecting investor wariness. For sentiment to shift, companies will need to show signs of demand resilience and better margin management in the upcoming quarters.

Conclusion

India’s FMCG sector is in a period of transition. The March quarter may not bring cheer, but it could offer vital signals about the pace and shape of recovery in FY26. Until then, a cautious approach from both investors and companies appears to be the prudent path forward.
Disclaimer: This article is for informational purposes only and should not be considered as investment advice.

April 7, 2025
How you can create a portfolio resilient to US trade policies!
The markets are on edge, global headlines are swinging sentiment like a pendulum, and just when investors thought it couldn’t get worse, the U.S. starts rattling the tariff saber again.
After a brutal sell-off that saw ₹24 lakh crore in investor wealth wiped out in three days, Indian equities staged a shaky rebound. But let’s be clear: this isn’t the “all clear” signal. If anything, it’s a moment to pause, reassess, and prepare for what could be a prolonged phase of volatility, especially with U.S. trade policy uncertainty looming large.
The big question: How do you shield your portfolio from the tremors of protectionism?
Let’s break it down.

1. Stay Local: The Case for India-Focused Sectors

The most obvious and most actionable takeaway? Decouple from global exposure. When U.S. tariffs go up, it’s not just China that feels the heat. Every export-dependent economy catches a cold.
That’s why market veterans are shifting their bets to domestic-facing sectors that are relatively insulated from global disruptions:
FMCG and Consumer Staples: These businesses thrive on internal demand and offer stable margins, especially as crude prices soften.
Private Banks & Financials: With credit growth inching up and potential rate cuts ahead, banks with strong asset quality and deposit franchises look well-positioned.
Infrastructure & Capital Goods: The government’s continued capex push into roads, rails, and renewables means order books are getting healthier.
Auto & Ancillaries: Cheaper raw materials and improved rural sentiment could drive volume growth here.
Bottom line: Focus on sectors driven by India’s consumption, investment, and policy tailwinds, not foreign demand.

2. Diversify Across Assets, Not Just Stocks

In stormy weather, the safest portfolios are the ones with well-anchored asset allocation. Don’t go all in on equities. Instead, structure your investments around:
Short-duration debt funds or fixed income for capital preservation.
Systematic Transfer Plans (STPs) to steadily move capital into equities over time, smoothing out volatility.
Gold ETFs or sovereign gold bonds as a hedge against global risk.
Tariffs are inflationary and can compress corporate margins. Having a mix of real assets and debt can stabilize returns.

3. Be Selective with Global Exposure

This doesn’t mean you cut out global equities entirely. But you do need to pick your spots. Look for:
Businesses with low U.S. exposure: Not all exporters are created equal. Companies exporting to Southeast Asia, Africa, or the Middle East might be less impacted.
Non-tariff-affected industries: Sectors like IT services may still perform well, especially with the demand for digital transformation remaining intact. But tread cautiously, client budgets in the West are under pressure.
And if you’re eyeing beaten-down global stocks, trust active managers who can distinguish between value traps and genuine bargains.

4. Play Defense, Not Offense

In tariff-led volatility, it’s not about hitting sixes, it’s about staying at the crease. Here’s how you play defense:
Stick with high-quality, cash-generating businesses.
Avoid sectors with volatile input costs or unclear demand visibility (like metals, export-heavy chemicals, etc.).
Maintain a margin of safety, don’t chase valuations.
The idea is simple: in a policy-driven storm, resilience > returns in the short term.

5. Be Patient. Build Gradually.

As tempting as it may be to try and time the bottom, history shows that consistency beats timing. Use corrections to gradually build exposure to high-conviction ideas.
Keep liquidity handy—not for panic exits, but for opportunity-based entries.
Remember: This is a phase, not a fate.

Final Thoughts

Trade wars, tariff threats, inflation fears; this isn’t new terrain. What’s different this time is that India isn’t a bystander anymore, it’s an opportunity.
With a stable macro backdrop, resilient consumption story, and robust banking system, India offers one of the most attractive setups globally, if you’re looking in the right places.
So while the world watches Washington, your focus should remain on:
Staying local
Staying diversified
Staying disciplined
Because in the game of global volatility, it’s not the loudest that wins. It’s the calm, calculated, and committed.
Disclaimer: This article is for informational purposes only and should not be considered as investment advice.
April 7, 2025
⁠Indian Stock Market 2026: 5 Key Trends You Can’t Ignore!
After a turbulent year marked by volatility and global headwinds, the Indian stock market is stepping into FY26 with a renewed sense of cautious optimism. Despite a significant selloff in the latter half of FY25, the Nifty 50 managed to close the year with a modest gain of 5.34%.
As market participants look ahead, several critical trends are emerging that could define equity market performance over the coming quarters.
Here are five key themes investors and market observers should closely watch in 2026:

1. Corporate Earnings on the Path to Recovery

Earnings growth remains a pivotal driver for market direction. FY25 witnessed a notable slowdown in corporate profitability, primarily due to persistent inflation, muted public capital expenditure ahead of the general elections, and global geopolitical instability. However, early signs point to a recovery in earnings momentum starting from the first quarter of FY26.
Sector-wise, financials, IT, automobiles, and FMCG are expected to lead this revival. Improved margin visibility, easing cost pressures, and a gradual uptick in consumption could help drive earnings in the right direction.
Stable fourth-quarter numbers from FY25 would set the stage for a stronger performance in the coming quarters.

2. Growth-Inflation Balance to Shape Market Mood

India’s macroeconomic fundamentals remain resilient. Real GDP growth for FY25 is projected at 6.4–6.5%, with expectations of 6.7% growth in FY26. Inflation, a major concern through much of FY25, is forecast to moderate, with CPI inflation estimated at 4.2% in FY26.
This favorable growth-inflation mix bodes well for both consumer sentiment and investment activity. However, weather-related uncertainties, especially around the monsoon, and global macroeconomic developments could still influence inflation trends and, in turn, policy decisions.
If the domestic economy continues to demonstrate stability amid external volatility, India’s equity markets could benefit from improved investor confidence and capital inflows.

3. Global Policy Shifts: Watching the Trump Effect

One of the emerging global risks for 2026 stems from political developments in the US. Potential shifts in trade policy—especially under a renewed leadership that favors tariff hikes—could reignite global trade tensions.
While India may not be the direct target of such measures, any large-scale disruption in global trade or capital markets could have a ripple effect on domestic equities. Investors will be closely watching geopolitical developments for cues on global capital flows and inflation expectations.

4. US Federal Reserve: The Interest Rate Compass

The US Federal Reserve’s policy direction remains a critical external variable for emerging markets, including India. While the US central bank has hinted at the possibility of rate cuts in 2026, its decisions remain highly data-dependent, with a close eye on inflation and fiscal policy dynamics.
Movements in US bond yields and the dollar index will continue to impact foreign institutional investment in Indian equities. Any dovish tilt by the Fed could support foreign inflows and boost risk appetite, while a delay in rate cuts could sustain capital outflows.

5. Global Economic and Geopolitical Landscape

Several macro-level international factors could influence India’s market performance this year:
Middle East Tensions: Any escalation in the region could trigger a spike in crude oil prices, posing challenges for India’s import bill and inflation.

China’s Growth Trajectory: A recovery in the Chinese economy could redirect foreign capital away from Indian equities, depending on relative valuations and growth prospects.

Commodity Price Volatility: Energy and food prices will remain key drivers of inflation trends, and consequently, monetary policy and market sentiment.
Collectively, these elements form a complex backdrop that Indian investors must navigate in 2026.

Future Outlook

The Indian equity market enters FY26 with several tailwinds, including a likely earnings rebound, a benign inflation outlook, and sustained domestic growth. However, external risks—from trade disruptions to global policy changes—may keep volatility elevated.
Investors are advised to focus on fundamentals, monitor macroeconomic indicators closely, and stay diversified. With a mix of caution and optimism, FY26 could offer both challenges and opportunities for India’s capital markets.
Disclaimer: This article is for informational purposes only and should not be considered as investment advice.
April 4, 2025
Urban Shoppers Are Back! FMCG Demand Surges – What’s Driving It?
India’s fast-moving consumer goods (FMCG) sector recorded a meaningful rebound during the March 2025 quarter, primarily driven by improved consumption in urban markets. This recovery was supported by favorable weather conditions, increased stocking of seasonal products, and early signs of easing inflation. The sector, which had faced headwinds from high input costs and subdued discretionary spending, is showing renewed resilience.

Quarterly Growth Accelerates Across Categories

The January–March quarter saw FMCG sales grow by over 11% in value terms, significantly higher than the 6–7% range seen in the same period last year. Retailers increased purchases across multiple categories, particularly in food and beverages, as part of advanced summer-season stocking. Urban consumption was a major contributor to this uptick, aided by higher ticket prices and product premiumization.
Despite the volume recovery remaining moderate, the overall value growth signals increased consumer activity and improved retail offtake. This marks the first strong performance quarter in recent times after a prolonged phase of inflation-led caution among shoppers.

Factors Contributing to Urban Demand Revival

Several interlinked drivers contributed to the recovery in urban markets:
Seasonal Stocking of Summer Essentials: Unusually high temperatures in February and March prompted early stocking of heat-driven categories such as ice creams, soft drinks, and hydration-focused products.
Recovery in Modern Retail and E-commerce: Growth was particularly visible in modern trade, quick commerce, and online platforms, which performed strongly compared to traditional kirana stores. These organized channels are increasingly shaping consumption behavior in cities.
Improved Affordability Amid Cooling Inflation: A decline in food inflation offered some breathing space to urban consumers, who had been constrained by rising rents, utility bills, and transportation costs. This positively influenced spending on essential categories like packaged foods, dairy, and personal care.
Consumer Shift Toward Branded Products: The shift from loose to packaged goods, especially in dairy, staples, and household products, continued as consumers prioritized hygiene, quality, and shelf-life.

Mixed Trends in Rural and Urban Markets

While rural consumption has remained steady, supported by government welfare programs and stable agricultural income, the urban demand environment has undergone a more volatile journey. Urban areas account for 50% to 70% of sales for most FMCG companies, and their revival is crucial for the sector’s long-term growth trajectory.
Data suggests that while rural demand has been gradually expanding over the past year, urban areas are now beginning to catch up. Still, challenges like weak wage growth and higher cost of living could keep the pace of recovery uneven.

Inflationary Pressures Continue to Impact Margins

Input cost inflation remains a significant concern for FMCG companies:
Agricultural Commodities: Prices of key inputs such as wheat, palm oil, coffee, and cocoa have increased sharply—rising between 17% and 78% year-on-year. These pressures are impacting cost structures and forcing companies to consider selective price hikes.
Discretionary Products Under Pressure: While staple categories have shown resilience, discretionary segments may continue to experience slower volume growth as consumers remain cautious.
Although non-agricultural commodities such as crude oil have stabilized to an extent, the overall cost environment remains challenging, which could weigh on margins in the near term.

Channel Preferences Continue to Shift

The retail distribution landscape is undergoing a transformation:
Modern Trade and Digital Platforms Lead Growth: Consumers in urban centers are increasingly turning to organized retail and digital commerce platforms, which offer convenience, better inventory, and promotional pricing.
Pressure on Traditional Trade: General trade channels, especially in smaller urban clusters, are witnessing slower growth due to changing consumer preferences and competitive pricing from e-commerce.
The shift toward digital and modern retail formats is likely to continue as brands realign their strategies to tap into the evolving consumer behavior.

Sectoral Outlook

Looking forward, the FMCG sector is expected to maintain its recovery momentum, supported by macroeconomic tailwinds and favorable consumption trends:
Expectations of a Normal Monsoon: This could bolster rural incomes and support consumption across both urban and rural areas.
Cooling Inflation and Potential Policy Easing: Lower food inflation, potential interest rate cuts, or tax relief measures could enhance disposable income, encouraging spending in urban areas.
Wider Adoption of Branded Goods: As awareness and accessibility grow, more consumers are expected to shift toward packaged and branded products, supporting value growth for companies.
While cost challenges persist, the underlying demand environment has turned more constructive. A broad-based recovery, especially in urban centers, will be critical for sustaining the sector’s growth trajectory through FY25.
Disclaimer: This article is for informational purposes only and should not be considered as investment advice.
April 4, 2025
Electronics Boom! Govt’s New PLI Scheme to Boost EMS Stocks

India’s electronics manufacturing landscape is poised for a major leap as the Union Cabinet has approved a ₹22,919 crore Production-Linked Incentive (PLI) scheme focused exclusively on passive (non-semiconductor) electronic components. The move is seen as a critical step toward building a self-reliant component ecosystem and could be a game-changer for Electronics Manufacturing Services (EMS) players.

A First for Passive Components

Announced by Union Electronics and IT Minister Ashwini Vaishnaw on March 28, the scheme aims to boost domestic value addition and support backward integration in the electronics supply chain.
“This is the first PLI scheme dedicated to passive components. It will attract ₹59,350 crore in investments, generate ₹4.56 lakh crore in production, and create over 91,600 direct jobs over the next six years,” the minister stated.
These components form the backbone of a wide array of devices used in sectors like telecom, automotive, consumer electronics, medical technology, and power systems.

EMS Sector Under the Spotlight

Following the announcement, shares of EMS companies are expected to draw market attention. Analysts noted that the government’s emphasis on domestic value creation could benefit the sector, especially firms with integrated supply chains and component-level manufacturing capabilities. While some market participants highlighted margin challenges for certain players, others indicated that long-term structural tailwinds remain intact.
Despite some near-term volatility, exacerbated by U.S. tariff-related developments, experts believe EMS companies could benefit as India becomes a more attractive alternative in global supply chains.

Why Now? A Timely Push Amid Global Disruptions

The timing of this policy move is strategic. With the U.S. recently imposing 26% reciprocal tariffs on Indian goods, and similar levies on nations like China and Vietnam, India’s relatively lower export exposure and better tariff structure make it a more favorable manufacturing base.
Experts noted that India’s lower tariff rates compared to peers like China and Vietnam could boost its EMS industry as global supply chains diversify.

Sectoral Performance

India’s domestic electronics production has soared from ₹1.90 lakh crore in FY15 to ₹9.52 lakh crore in FY24—a CAGR of over 17%. Exports, too, have risen from ₹0.38 lakh crore to ₹2.41 lakh crore in the same period, growing at more than 20% annually.
Still, the country faces a substantial import dependency for passive components. As per industry estimates, the non-semiconductor component industry stood at $13 billion in 2022 and is projected to reach $37 billion by 2030—still leaving a significant domestic demand-supply gap.

PLI 2.0: Building the Backbone of Electronics Manufacturing

This new scheme is part of the broader effort to integrate Indian manufacturers into global value chains (GVCs). It also aims to reduce import dependence and ensure that India climbs higher in the electronics manufacturing value ladder.
The government emphasized the scheme’s strategic vision: enhancing domestic capability, creating a robust supply chain, and fueling India’s ambition to become a global electronics powerhouse.

Conclusion

While optimism is high, some experts also advised caution. Based on market analysis, a significant portion of China’s exports are high-complexity products, whereas India’s share remains comparatively lower. Despite the China+1 narrative, India’s gains in high-tech exports have been limited so far.
Nevertheless, the consensus remains that the PLI scheme could provide a much-needed boost for the EMS sector and help position India more favorably in the global electronics manufacturing ecosystem.
Disclaimer: This article is for informational purposes only and should not be considered as investment advice.

April 4, 2025
Gas Stocks on Fire! Govt Hikes Prices – What It Means for Investors
Gas stocks surged on March 24, recording gains between 0.5% and 5% in early trading following proposed regulatory changes and an open house discussion scheduled for mid-April. Analysts from top brokerage firms, including Morgan Stanley and CLSA, have shared their perspectives on how these developments could impact investors in gas stocks.

What Is Driving the Rally?

1. Regulatory changes
Morgan Stanley’s outlook suggests that long-haul gas transporters and upstream producers stand to benefit significantly from the proposed tariff changes. Companies like GAIL India, Oil India, and Reliance Industries may benefit, while city gas players may see only a normalization of returns.
2. Tariff modifications for pipeline transmission companies
Gas pipeline transmission companies are expected to benefit from four proposed tariff modifications. While the changes may lead to slightly higher costs for end consumers, those transporting gas over long distances could actually experience lower costs.
3. PNGRB’s Proposed Tariff Amendments
The Petroleum and Natural Gas Regulatory Board (PNGRB) has proposed key amendments to natural gas transmission tariff regulations. The amendments, which are currently open for public consultation, aim to ensure fairer and more affordable gas transportation across regions. The PNGRB has set an April 11 deadline for stakeholders, including gas suppliers, consumers, and traders, to submit feedback before finalizing the new regulations.

Impact on Different Segments

City Gas Distribution (CGD) Players
According to CLSA, city gas players are expected to see operational expenditure (opex) relief, potentially improving margins. However, some industrial consumers may face slight cost increases due to the marginal hike in tariffs.
Long-Haul Gas Transporters and Upstream Players
Companies like long haul gas pipelines will likely benefit the most due to higher transmission tariffs, which could improve their revenue and profitability.
Industrial Gas Consumers
The shift in the tariff structure may have mixed effects on industrial gas consumers. While businesses in distant regions could benefit from lower tariffs, those located closer to gas sources might face slight price increases.

Government’s Long-Term Vision for Gas Sector

Gajendra Singh, a PNGRB board member, emphasized that the objective of these amendments is to boost gas usage across the country while ensuring fair pricing. The proposed changes include:
Reducing the existing three-zone tariff structure to two zones.
Lowering gas transportation costs for consumers in remote areas.
Enhancing the viability of older, isolated gas fields by ensuring that pipelines can recover operational costs.

What Should Investors Do?

With regulatory changes on the horizon, investors should consider the following factors:
Long-Term Growth Prospects: Companies involved in gas transmission may offer strong long-term investment potential due to favorable regulatory adjustments.
City Gas Companies: Investors should monitor how opex relief impacts margins
Industrial Gas Users: Those invested in industrial consumers of gas should be aware of potential cost hikes affecting profitability.
Upcoming Public Consultation: The final version of the regulations will be shaped by industry feedback. Investors should keep an eye on PNGRB’s final decision following the consultation process.

Conclusion

The proposed regulatory changes in the gas sector are reshaping investor sentiment, with pipeline operators and transporters emerging as primary beneficiaries. While the adjustments aim to boost gas usage and enhance affordability, the mixed impact on different industry players underscores the importance of a well-informed investment strategy. As PNGRB finalizes its regulations, market participants should stay vigilant and adapt their investment decisions accordingly.
Disclaimer: This article is for informational purposes only and should not be considered as investment advice.
April 4, 2025
⁠Impact of Stock Market Correction? 20 Companies Fall from ₹1 Lakh Crore Club!
Amid an ongoing market correction, nearly 20 companies listed on the BSE have slipped below the ₹1 lakh crore market capitalisation threshold since the end of September 2024, when Indian equities were at their peak.
The affected firms include Mankind Pharma, Tata Consumer Products, CG Power, Havells India, Dr. Reddy’s Laboratories, Apollo Hospitals, JSW Energy, Jindal Steel & Power, Info Edge, Samvardhana Motherson, Dabur, Zydus Lifesciences, ICICI Lombard, Indus Towers, Cummins India, Bosch, ICICI Prudential Life, Canara Bank, and Polycab, among others.
As of now, 86 companies maintain a market cap above ₹1 lakh crore—a 19% decline from 106 in September 2024. However, five new entrants have emerged, benefiting from strong stock rallies. These include Hyundai Motor India, The Indian Hotels Company, Shree Cement, Mazagon Dock Shipbuilders, and Max Healthcare Institute.

Factors Driving the Market Correction

The correction has been triggered by several key factors, including:
Sustained foreign investor selling
Rich valuations
Softening earnings
Slower economic momentum
Geopolitical concerns, particularly post the US elections
Since the market highs in September, the Sensex and Nifty have dropped over 10%, while the BSE MidCap and SmallCap indices have fallen by nearly 15% each.

Historical Context

Interestingly, despite the recent correction, the number of companies with a market cap above ₹1 lakh crore has slightly increased between the end of FY24 and early FY25. Over the years, this category has seen fluctuations, with 48 companies in FY23 and FY22, up from 36 in FY21, 19 in FY20, and 27 in FY18.

Market Outlook

Analysts note that the market faced excessive selling pressure, leading to a much-needed valuation reset. This recalibration offers a strategic opportunity for investors to accumulate fundamentally sound stocks at more reasonable valuations.
Morgan Stanley, in its latest report, characterised the correction as a potential buying opportunity despite lingering concerns around growth, retail investor sentiment, and stretched valuations. While acknowledging the challenge in timing the bottom, the firm remains optimistic about a market rebound. It highlighted private financials as offering the most attractive risk-reward tradeoff currently.
Veteran investors have echoed similar sentiments, calling the correction a “normal pullback within a broader bull run.” While acknowledging temporary turbulence stemming from political and economic shifts—particularly in the US—market experts remain confident in the resilience of markets and the long-term trajectory of globalisation.

Disclaimer: This article is for informational purposes only and should not be considered as investment advice.
April 4, 2025
SEBI’s Big Move! Will Foreign Investors Gain Direct Access to Indian Stocks?
The Securities and Exchange Board of India (SEBI) is reportedly considering a major policy shift that could alter the way foreign investors participate in India’s stock market. According to a recent report by the Economic Times, SEBI is exploring the possibility of allowing overseas individuals to invest directly in Indian equities, bypassing the existing foreign portfolio investor (FPI) framework.
This potential reform aims to expand the ownership base for local risk assets, making Indian markets more accessible to global investors. However, concerns about regulatory safeguards and compliance risks remain key discussion points.

Current Investment Framework for Foreign Investors

At present, foreign individuals can invest in Indian primary and secondary markets only through the FPI route. Within this structure, investors are required to register under Category II FPIs, which involves engaging a local sub-custodian in India to manage compliance and operational requirements.
Key restrictions under the current FPI framework:
Foreign investors can own up to 10% of a listed Indian company under the FPI route. Any stake exceeding this limit is considered foreign direct investment (FDI) and is subject to sector-specific restrictions.
Overseas investors who do not want to register as FPIs have the option of using participatory notes (P-notes), an instrument that has been viewed with suspicion due to its perceived lack of transparency.
Strict Know Your Customer (KYC) and Anti-Money Laundering (AML) regulations make it difficult for foreign individuals to invest directly in Indian equities.

SEBI’s New Proposal

In a meeting last week, SEBI officials and market participants discussed the potential benefits of allowing direct foreign individual investments in Indian stocks. If implemented, this move could attract ultra-high net worth individuals (UHNWIs) from major financial hubs like London, New York, and Singapore.
Possible benefits of the proposal include:
Broadening the Investor Base: By allowing direct participation, India can attract a larger pool of international investors, increasing liquidity and market depth.
Easier Compliance for Investors: Bypassing the FPI route could simplify regulatory procedures, making it more convenient for foreign individuals to invest.
Strengthening India’s Global Market Standing: Providing direct access to foreign individuals could enhance India’s reputation as a globally competitive investment destination.

Need for Safeguards and Regulatory Challenges

While the proposal has the potential to boost foreign investments, regulatory safeguards will be crucial to mitigate risks such as money laundering and tax evasion. Legal and financial experts have highlighted the importance of maintaining stringent compliance measures.
Key concerns:
Ensuring Proper KYC and AML Compliance: SEBI must implement robust measures to ensure foreign investors adhere to India’s financial regulations.
Tax Compliance and Repatriation Controls: Clear guidelines must be established to ensure that foreign investors fulfill tax obligations before repatriating funds.
Maintaining Transparency: Direct access should not create loopholes that can be exploited for illicit financial activities.

Market Implications

India has experienced significant foreign investor selloffs in recent months, with FPIs reducing their exposure to Indian equities. SEBI’s proposed reform could serve as a countermeasure to attract fresh international capital and stabilize market volatility.
SEBI Chairman Tuhin Kanta Pandey, speaking at the Moneycontrol Global Wealth Summit 2025, emphasized the need for both domestic and foreign investors to support India’s economic growth. “We will be happy to engage with FPIs and AIF industry participants to address their difficulties and further rationalize regulations to promote ease of operation,” he stated.

So, What’s Next?

SEBI is expected to conduct further deliberations with key stakeholders.
Government and RBI approvals will be critical in shaping the final decision.
Investors should stay informed about regulatory updates that could impact market dynamics.
India’s capital markets stand at a pivotal juncture, and SEBI’s next steps will determine the extent to which global investors can participate in India’s growth story.

Conclusion

SEBI’s potential move to allow direct foreign individual investments in Indian equities marks a significant departure from the existing regulatory framework. While the proposal has the potential to enhance market liquidity and attract global investors, concerns about compliance, transparency, and regulatory safeguards must be addressed.
With discussions still in their early stages, the outcome of this policy shift remains uncertain. However, if implemented with the right regulatory framework, this change could position India as a more accessible and attractive investment destination for international investors.
Disclaimer: This article is for informational purposes only and should not be considered as investment advice.
April 4, 2025
⁠Hot IPOs in 2025! From LG to JSW Cement – 5 Big Listings to Watch
After a rollercoaster year in 2024, India’s IPO market is gearing up for an eventful 2025. With a mix of well-established giants and high-growth startups making their way to Dalal Street, investors are eagerly watching for the next big opportunity. Despite global volatility, the Indian stock market has shown resilience, fueling optimism for upcoming IPOs in 2025.
Industry experts believe that companies are no longer just focusing on raising capital but are also prioritizing financial stability, innovation, and ESG (Environmental, Social, and Governance) factors to attract discerning investors. According to experts, the narrative has shifted from growth at all costs to sustainable, profitable expansion.
With that in mind, here are five of the most anticipated IPOs of 2025 that investors should keep an eye on:

1. LG Electronics India IPO

One of the most awaited IPOs of the year, LG Electronics India, is finally making its market debut. The South Korean electronics giant has received final approval from SEBI and is preparing for a full Offer for Sale (OFS).
IPO Size: Yet to be disclosed
Lead Managers: Morgan Stanley India, J.P. Morgan India, Axis Capital, BofA Securities, and Citigroup Global Markets.
What to Watch: LG Electronics India has a strong brand presence in the Indian market, making this a highly anticipated listing. However, since it is an OFS, all proceeds will go to the parent company rather than for business expansion.

2. JSW Cement IPO

India’s booming real estate sector is driving cement demand, and JSW Cement is ready to capitalize on the trend. Backed by the JSW Group, the company has received SEBI approval to raise ₹4,000 crore through its IPO.
IPO Structure: Fresh issue of ₹2,000 crore + OFS of ₹2,000 crore
Why It Matters: JSW Cement is expanding aggressively and could benefit from India’s infrastructure push. Investors should look at profitability trends and expansion plans before making a decision.

3. Tata Capital IPO

After the success of Tata Technologies’ IPO, Tata Capital is set to become the next big financial entity from the Tata Group to go public. Reports indicate that the IPO could be worth over ₹15,000 crore, making it one of the largest listings of the year.
Investment Banks: 10 banks have been hired to manage the issue.
Potential Valuation: One of the biggest IPOs from the Tata Group in recent years.
Investor Interest: Given the strong reputation of Tata Group and the growth of the NBFC sector, this IPO is expected to see significant demand.

4. boAt IPO

boAt, India’s leading consumer electronics brand, is making a second attempt at going public after shelving its plans in 2022 due to unfavorable market conditions. This time, the company is targeting a ₹2,000 crore IPO.
Expected Valuation: Over $1.5 billion
Market Position: Strong presence in the wearables and audio electronics segment.
What to Watch: Investors should monitor profitability trends as the company has been focusing on expansion while competing in a highly competitive market.

5. NSDL IPO

The National Securities Depository Ltd (NSDL), India’s largest depository, is preparing for a ₹3,000 crore IPO. The offering will be a complete OFS, with existing stakeholders like NSE, IDBI Bank, and HDFC Bank reducing their stakes.
Key Concern: The IPO timeline is tight as regulatory deadlines approach.
Industry Importance: As a critical player in India’s financial market infrastructure, NSDL’s IPO is likely to attract significant institutional interest.

The Road Ahead for IPOs in 2025

While market volatility has led to a cautious approach from promoters and investment bankers, a strong economic recovery and improved market sentiment are expected to drive a resurgence in IPO activity. Investors should stay informed and evaluate IPOs based on valuations, growth potential, and market conditions.

Other Upcoming IPOs to Watch:

Reliance Jio – Potentially the biggest IPO in India’s history
Zepto – Quick commerce startup aiming for a multi-billion-dollar valuation
Ather Energy – Riding the electric vehicle boom
PhonePe – Fintech giant backed by Walmart, eyeing a blockbuster debut
HDB Financial Services – A long-awaited NBFC listing
With multiple high-profile IPOs lined up, 2025 could be a landmark year for the Indian stock market. Whether you’re a retail investor or an institutional player, keeping an eye on these listings could lead to exciting investment opportunities.

Disclaimer: This article is for informational purposes only and should not be considered as investment advice.
March 28, 2025