IDBI Capital Markets to expand derivatives market operations

Suresh Nair

Mumbai, Jan 2: IDBI Capital Markets Services Ltd (ICMS) has firmed up plans to expand its operations in the derivatives market.

ICMS managing director, Nageshwar Rao, said that while current volumes are not very high, with the introduction of stock futures, the same is expected to increase considerably.

The futures’ turnover is around Rs 600 crore per day, which is 60 per cent of the cash market turnover. In the developed markets, it is in multiples of cash market turnover, Mr Rao added.

ICMS has also increased its equity capital by Rs 50 to Rs 150 crore. ICMS had declared an interim dividend of 20 per cent on the increased capital of Rs 150 crore, Mr Rao said. The net-profit of ICMS increased to Rs 66 crore for the second quarter ended September 2001 as against a profit of Rs 77 crore for the entire year of 1999-00.
ICMS till last year was the largest primary dealer. ICMS turnover in the debt market increased to Rs 61,500 crore for the second half of the current fiscal as compared to Rs 31,000 crore for the whole of the preceding fiscal.

Mr Rao said that the increase in capital is in line with the increase and growth in turnover and profitability. "The markets were recently effected by fears of war, but bond prices have recovered by 100 per cent, and prices of many securities have touched their earlier peaks," Mr Rao said, adding that he expect the second half also to be good.

However, the company’s brokerage arm has been affected as the volumes in the capital markets have fallen to around Rs 1,000 crore as against Rs 10,000 crore earlier.

Mr Rao said that in the current, regulators and the government are making efforts towards improving the markets and introducing new instruments. He added that it is just a matter of time before the markets improve.

ICMS has already taken steps towards retail participation in debt instruments, and offered schemes to this extent.

According to Mr Rao,"The retailing of G-Secs and corporate bonds will open up a new class of investment opportunities for investors who will get to invest in a wide variety of companies without giving up the safety. Investors will be able to diversify their portfolio among various ‘AAA’ rated bonds of FIs, PSUs to increase their yields."