According to market players, although the net demand for funds had gone up over the last one week, easy flow of funds forced the badla rates to go down drastically during Friday's session. At the start of the carry-forward session, net outstanding position was at Rs 3,100 crore, a rise of 7.5 per cent over the week.

According to Arun Kejriwal at Woodstock Securities, ``funds normally used for arbitrage purposes entered the market this Friday and forced the badla rates dip to unrealistically low levels.'' According to him, since the next settlement on the NSE and the BSE ends on the same day i.e. on Thursday, there is not much scope for the arbitrage business. On this consideration alone, the arbitrageurs have disposed of their holdings and have diverted the funds for badla financing, explained Kejriwal.

Usually, the five-day settlements on the BSE ends on a Friday and that on the NSE ends on a Tuesday. Due to Y2K considerations this year, the Sebi has directed all the exchanges to remain closed on Friday, December 31 also and the settlement on each exchange is also required to be closed. As the markets are closed next Friday onwards, the weekly carry forward session on the BSE will take place on Thursday.

To accommodate the badla session, the BSE will open at 9.30am on Thursday and close at 2pm in the afternoon. The NSE however, on the same day, opens at 9am and closes at 1pm. Over the last few weeks, as the net outstandings on the BSE shot up and a series of IPOs sucked out funds from the system, the badla rates had shot up from around 11 per cent level in mid-November.