‘Bigger players will be more interested’

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: How can an investor maximise the returns on their portfolio from SLBM?

Long term investors, including insurance companies, mutual funds have core portfolios, which are for a long-term duration. By lending stocks that are not for sale, they can earn some return. The risk is that once lent, in between if the stock moves up, the investor loses the chance to sell. But as long as it is the core portfolio, that risk is anyway not there.

What is your view on the settlement period of T+8 and high margin levels levied on the lender and borrower?

The way the current short selling and SLBM is structured, it is within the F&O group, the basic purpose is defeated. Unless the list is expanded to all stocks, one cannot expect short selling by institutions to catch one's fancy. One can always sell short in F&O stock futures. Also, T+8 means an investor borrowing the stock to go short, has to buy back on T+5, so that he can take and give delivery on T+8. That means his shorting decision is for only 5 trading days and he has to shift position to another lender. This increases the impact costs.

Do you think SLBM would be confined to bigger players or do you see retail participation in the future?

Bigger players will be more interested as they have the core portfolio, which now will yield some return. Retail players do not pave the discipline of distinguishing between core/non-core portfolios and accordingly, might not come to the SLBM market in any big way. This situation will change slowly, because in a volatile market, earnings through stock lending will be important.

What could be the probable reason for few volumes in the SLBM market? Do you see volumes picking up in the future?