GIFT Nifty: Reshaping India's financial landscape | Red Hot Tomato Prices: What's the cause? | How to declare MF investments in ITR?

For over two decades, Indian investors relied on a clever trick to gauge market sentiment: looking at the Singapore stock exchange (SGX) Nifty futures contracts. However, this practice came to an end on July 3, 2023, as the National Stock Exchange (NSE) and SGX parted ways amidst differences. However, this breakup led to a groundbreaking development that could reshape India’s financial landscape—the birth of GIFT Nifty.

The Rise of GIFT City and IFSC Authority: Amidst the NSE-SGX dispute, India had been working on establishing a financial hub called the Gujarat International Finance Tec-City (GIFT City). This 900-acre campus between Gandhinagar and Ahmedabad aimed to create a free trade zone with a 10-year tax holiday to attract foreign businesses. To bolster GIFT City’s potential, the government established the International Financial Service Centre Authority (IFSC Authority) as a unified regulator, streamlining policies in GIFT City.

NSE’s Proposal and Collaboration with SGX: In a bid to bring trading back to India and leverage the potential of GIFT City, NSE proposed a collaboration with SGX. The idea was to set up a platform in GIFT City where foreign investors could trade the Nifty index in US dollars, eliminating the need for investors to rely on SGX. Recognizing the significance of the Indian market, SGX agreed to the proposal, despite the loss of SGX Nifty, which accounted for a substantial portion of its offerings.

The Emergence of GIFT Nifty: On July 3, 2023, $7.5 billion worth of SGX Nifty contracts migrated to GIFT City, marking the birth of GIFT Nifty. NSE took charge of handling trades, while SGX ensured the verification and compliance aspects. GIFT Nifty retains the essence of its predecessor, offering foreign investors a platform to trade the Nifty index in dollars. This move has opened doors for increased participation in India’s equity market, attracting more global investors and capital to fuel growth.

Benefits for India

One of the key benefits of GIFT Nifty and the NSE IFSC receipts is the broadening of liquidity. Fragmented liquidity will now converge into a single pool, creating a more comprehensive market. To provide a sense of scale, the total open interest on Nifty in India is approximately $1.5-2 billion. In contrast, this new market boasts a much larger notional open interest of around $7 billion.

Strengthened Position as a Financial Hub: GIFT City and IFSC Authority gain prominence as a unified regulator, consolidating the roles of SEBI, RBI, IRDAI, and PFRDA. This integration promotes ease of doing business and attracts financial services companies, solidifying India’s position as a global financial hub.

Increased Foreign Investor Participation: GIFT Nifty offers foreign investors a convenient avenue to access India’s equity market in US dollars, streamlining transactions and reducing currency-related complexities. This accessibility can result in higher foreign capital inflows, driving economic growth.

India’s Growing Influence: GIFT Nifty reinforces India’s growing stature in the global investment landscape. By offering a dollar-denominated platform within GIFT City, India becomes an attractive destination for foreign investors seeking exposure to the Indian market, strengthening its economic and financial influence.

What does it mean for NSE, which may go for public offering in the upcoming months? Read the full report here.

Question in Focus

The Curious Case of Red Hot Tomato Prices: Who’s to blame?

Whether it is a paneer butter masala or a lip-smacking idli tossed in a bowl of sambhar, every desi dish has one best friend- tomato! And now, the best buddies have separated.?

There’s enough noise around how tomatoes have gone missing from the Mcdonald's burgers, let alone our juices or salads. So now you know- even a food chain can’t afford it. And even if they say they can, most of the tomatoes are spoiled and can’t be consumed.

In some states, the prices have shot up to ?250 per kg, while the average is around ?150. And 1 kg has around 14 tomatoes, on average. This means if the selling price is ?150, 1 tomato costs close to ?11.?

But hey! India, after China, is the largest tomato producer in the world with an annual production of 18,399,000 tonnes! Then where have these tomatoes disappeared?

Let’s understand what’s behind the shocking price hike, how the previous months' fared, and are the prices are expected to go down.

The Current Surge

• The sudden rise in prices can be attributed to a previous sharp decline in April-May, forcing many farmers to abandon their crops.?
• Additionally, the abnormally high temperatures experienced in March and April resulted in pest infestations that adversely affected production.
• Tomato plants in Karnataka and Maharashtra have been severely affected by various viruses, causing significant damage.?
• One such example is the lead curl disease, which has impacted tomato farms in Kolar, Karnataka.?
• The local Agricultural Produce Market Committee (APMC) has experienced a significant decline in tomato supply.?
• It received only 3.2 lakh quintals compared to nearly 5.50 lakh quintals in June 2022.

Historically Speaking?

• We come across such instances almost every year- farmers throwing tomatoes because of an oversupply and then there’s a sharp decrease in supply, which fuels such debates.?
• But let’s understand this a bit more. In India, there are two primary tomato crops. The rabi crop is predominantly cultivated in Maharashtra and in certain regions of Karnataka and Andhra Pradesh. This crop is available in the market from March to August.
• Subsequently, the kharif crop takes over the supply from Uttar Pradesh, Nashik in Maharashtra, and other parts of the country after August.
• During the rabi season, approximately 500,000 hectares of farmland are dedicated to growing tomatoes, while around 800,000 to 900,000 hectares are allocated for the kharif crop on average.
• The first batch of tomatoes ensures a supply until April, while the second batch continues to feed the market until August. The crop reaches maturity within three months, and picking takes place for about 45 days.
• The rabi crop generally provides better returns for farmers. However, during March-April this year, farmers faced a setback.?
• The collapse in prices during March-April and early May occurred because a significant portion of the tomatoes entering the market was of low quality, leading to panic selling among farmers.

Is there a solution?

• Nobody knows. Tomatoes are highly perishable and even in cold storages, they don’t survive for more than 2 weeks.?
• The government has not given any statement with respect to whether they have a solution for this or not.?
• The Central Food Technological Research Institute (CFTRI), located in Mysuru, has devised an inexpensive technique for storing tomatoes at room temperature.
• By utilizing a straightforward brine solution (a liquid based on salt), tomatoes can be preserved for just ?3 per kg.
• They were working with the Karnataka government to materialise it but nobody knows what has happened to the whole project.

Who benefits from all of this? "Tomato prices running high? Cook with tomato puree instead!" says an advertisement by BigBasket. FMCG companies are selling an unhealthy alternative in purees and jams. And people are hoarding them as well, which is what the canned food companies want.?

So will the prices go down??

• The reduction in prices is highly unlikely.?
• The Pune wholesale market is currently receiving an average of 24,000-25,000 crates of tomatoes per day, with each crate weighing 20 kg.?
• This is nearly half of the expected quantity of 40,000-45,000 crates during this period.?
• The upcoming crop will be the Kharif tomato, and the transplantation process has recently begun after the onset of the monsoon.
• We can anticipate an improvement in arrivals and a correction in prices only after August.

Up your finance quotient: What else needs your attention?

1) Defend your portfolio with these winning defense stocks!

Post PM Narendra Modi’s state visit to the US and the many deals signed by the Indian government in the last few months, one thing’s for sure: defence stocks are here to rule them all. You can defend your portfolio using defence stocks, and if you have them in your portfolio, there’s a high growth opportunity there. And if you don’t have defence stocks in your portfolio, this is your chance to find out the big winners of the sector.

2) File your ITR like a pro! MF investments & declaration

Mutual funds have been a popular choice for Indian investors for a long time. However, new investors often wonder how to report the income from mutual funds and which Income Tax Return (ITR) form to use. If you're in the same situation, you're in luck! This article will guide you on how to declare your mutual fund investments in your ITR and disclose any capital gains.

3) Market Cap Movers: Who gets promoted and who gets demoted?

The Association of Mutual Funds in India (AMFI) recently reclassified certain stocks, and banking stocks took the lead in being reclassified as large-cap companies. Among them, Punjab National Bank, IDBI Bank Ltd., and Canara Bank were moved from mid-cap to large-cap categories. This reclassification happens twice a year.

AMFI categorizes stocks into large-cap, mid-cap, or small-cap based on their average daily market capitalization over a six-month period. The top 100 companies with the highest average daily market cap are considered large caps, while the next 150 are classified as mid-caps, and the remaining stocks are labelled as small-caps.

Interestingly, Mankind Pharma Ltd. was an exception among the seven stocks added to the large-cap category. It was not previously categorized as a mid-cap company. This pharmaceutical company was listed on the Indian exchanges on May 9 and has seen an impressive rise of over 58%.

Furthermore, Punjab & Sind Bank, Bank of Maharashtra, and Rail Vikas Nigam Ltd. were earlier classified as small-cap stocks but have now been upgraded to the mid-cap category.

To get more such quick takes on brands, stocks and economy, follow us?here.

Week Ahead for Markets: What to expect?

1) Corporate Earnings: TCS & HCL Technologies will announce their results on July 12, and Wipro on 13th. Apart from that, numbers by Avenue Supermarts, Bandhan Bank, JSW Energy, Federal Bank, Angel One, and Tata Metaliks will also be announced this week.

2) CPI Inflation on July 12, and manufacturing production numbers for May scheduled on July 14. WPI inflation and balance of trade for June will be released on July 14.

3) US Inflation for June scheduled for July 12. This is crucial data for the Federal Reserve ahead of its policy meeting on July 26.

4) Global Economic Data Points:

5) FII Flows: FIIs were net buyers to the tune of over Rs 9,100 crore in the first week of July, in addition to around Rs 55,000 crore worth of buying in the cash market in the previous two months.?

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