Short-selling, SLB, institutional margins take off on a low note

Written by Markets Bureau | Mumbai, Apr 21 | Updated: Apr 22 2008, 06:17am hrs
On a day when the markets ended firm, a new initiative that began from Monday, in the form of short-selling by institutional investors, and margins to be paid by them in the cash segment took off on a low note. According to dealers, only 15-20 brokers registered themselves with exchanges for short- selling and securities lending and borrowing (SLB).

As the institutional investors try to get accustomed with the new margining system, which has been made mandatory by the markets regulators from Monday, the trading volumes at both the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE), stock exchanges (SEs) took a hit in an already uncertain market scenario. The total trading volumes at both SEs fell by more than 15% as compared to the volumes traded on the previous trading day. On Monday combined volumes at both the SEs stood at 100.43 crore shares as against 119.21 crore shares on the previous trading day. As per the data available on the web site of the (NSE), the SLB scheme, there were only three stocks traded with a total quantity of 260 shares. The stocks traded included Reliance Industries Ltd (RIL), SBI and RNRL. The RIL stock was traded at Rs 11 per share, while SBI and RNRL were traded at Rs 5 per share and Rs 0.50 per share respectively. These are the badla charges that investors who were willing to borrow these shares to meet their delivery obligations. were charged .

Anita Gandhi, head, institutional business, Arihant Capital, said, The volume in the segment was low as participants have to get ready for the trading. As per latest information available, hardly 15-20 brokers have registered for short-selling and SLB. Most of the insurance companies and bank treasuries were interested in stock-lending rather than short selling as it provides them a new revenue stream".

In a move to provide a level playing field for investors, the Securities and exchange board of India (Sebi) had made it mandatory for the institutional investors to pay margins in the cash segment, however institutional investors kept a low profile as they tried to understand the nitty-gritty of the system. Sheshadri Bharatan, director stock-broking, Dawnay Day AV Financial Services, said Institutions are taking the-wait-and -watch approach and as they will see few deals being done this system will slowly pick up as it is a nice move by the Indian regulators which will provide depth to the Indian markets.