No delivery in liquid stocks prompts operators to offload

Our Markets Bureau

Mumbai, June 6: EVERYONE at the markets are surprised as to why the bourses, which were on the path of recovery till the end of last week of May, have suddenly started retracting from the first week of June?
There are two apparent reasons; Firstly, huge selling resorted to by domestic mutual funds and slowdown in purchases by foreign institutional investors (FIIs).

Besides, according to brokers the important factor that has prompted market players to unwind their positions is that scores of liquid stocks in the “A” group of BSE, are entering the no-delivery-period from June 11. This means that the facility of deferment (carryforward) of positions will not be available in these frontline stocks from the next session of BLESS and ALBM to be held on June 15 and June 18 respectively.

Another important reason for the fall in the market is unwinding of open positions by market operators. These market players have become clueless in wake of the stand taken by FIIs and also because of impending ban on all deferral products by markets regulator Sebi from July 2.

Both The Stock Exchange, Mumbai (BSE) and the National Stock Exchange (NSE) do not allow the facility to carryforward in the stock which enter the no-delivery-period.

No-delivery-period in the stock is that period during which the company’s transfer books remain closed to take on record names of those shareholders who are entitled for various corporate benefits like dividend, bonus shares and rights shares.

Major stocks like Satyam Computer, Century Textile Industries, Essel Packaging, Gillette, HDFC Ltd, Nicholas Piramal, Rhone Poulenc and Tata Chemicals would not be available for BLESS during the current settlement. Digital Equipment, Pentamedia Graphics, Reliance Industries (RIL) and others are expected to enter the no-delivery-period from the next settlement beginning Monday June 11.

The carryforward of positions by operators have also been discouraged by the exchange authorities in wake of the strict warning by Sebi. As a part of this move, the exchange authorities at the BSE have not only stepped up the carryforward margins but have also decided to transfer all the outstanding positions prior to May 15 from July 2 to the rolling module in BLESS.

In other words, these positions will be traded for daily badla till September 3 and it will attract necessary margins on daily basis. The move by the BSE to transfer these positions to the rolling mode could be to make the holding of positions more difficult as the holder of the position will have to pay the margins almost on daily basis, feel marketmen.