Show me the money!

Better Markets Digest #8. In this edition, we look at:

- SEBI wants more money

- Indians still buying real estate?

- Grocery is a massive business

What BS(E)

BSE stock fell 18% after SEBI increased its regulatory fees. SEBI asked it to pay fees based on its annual turnover, calculated from the "notional value" of its options contracts rather than the “premium value”.

I know, I know. Sounds complicated. This is how ChatGPT described notional value and premium value:

Suppose you want to buy a call option on Company XYZ stock. The current price of Company XYZ stock is ?100 per share, and you purchase a call option with a strike price of ?110 that expires in one month. The premium for this call option is ?5 per share.

Here's how the premium and notional value work in this scenario:

Premium: The premium you pay for this call option is ?5 per share. Since each options contract typically represents 100 shares of the underlying stock, the total premium you pay is ?5 x 100 = ?500. This ?500 is the maximum amount you could lose from holding this option if it expires worthless (since you wouldn't exercise it if the stock price stays below ?110).

Notional value: The notional value is calculated by multiplying the number of shares controlled by the option by the stock's current price. In this case, the notional value of one options contract is ?110 (the strike price) x 100 shares = ?11,000. This represents the theoretical value of the stock if you were to exercise the option at the current price.

So, overnight, BSE was forced to pay fees on the entire ?11,000, instead of ?500. And it was to do this for every year since FY 2007.

For this particular year, BSE is required to pay 96Cr .

Is it bad for BSE? Maybe.

Tijori

What are Indians doing with their money?

Aditya Birla AMC put out a report on how Indians are making their money work for them.

Here are some interesting tidbits:

Within financial assets—bank deposits and cash still account for a major portion. And, physical assets like gold and real estate still dominate at two-thirds of total assets.

Equity exposure has doubled from 2.2% in 2013 to 4.7% in 2023 but remains low compared to other countries. For context, equity allocation in the US is 35% in households.

Till 1990, allocation to financial assets in the US was declining. However, post-1990, there was a reversal with increasing allocation to financial assets like equities. This was aided by regulatory changes allowing retirement funds to invest in listed equities.

Currently, financial assets constitute 70-75% of US household assets, while physical assets are just 25-30%. Within financial assets, allocation to equities has been consistently over 30% and was nearly 40% in 2022.

We have written about the report in detail here .

Quickkkk

People can’t stop talking about quick commerce. Some say it will kill traditional mom-and-pop shops, and some say they are unsustainable. Goldman recently put out a report that said that Blinkit has become bigger than Zomato’s food delivery business. This is a big feat for Blinkit considering Zomato acquired it back in 2022 because they it trouble raising funds.

WOW!

At the same time, Getir, an international on-demand delivery service which had acquired rivals in the US and Europe is facing some tough times. ?

Goldman estimates the total value of quick-commerce orders this financial year to be $5 billion. The online grocery market is ~$2.5B.

BTW, considering Swiggy might IPO soon , it will be interesting to see how the numbers of Instamart compare with Blinkit, and more broadly, where quick commerce goes from here.?

Ken did a good piece on the report and how it affects Reliance’s Jiomart.

One interesting chart

State of Economy