MUMBAI, February 8: Less than four months after introducing market friendly carry-forward system on the Bombay Stock Exchange (BSE), the badla business has gained ground. Thanks to the removal of certain operational problems, the total outstanding value of carry forward on the BSE crossed the Rs 400 crore mark and touched at Rs 421.39 crore last week. This is in contrast to pre-December 1993 period when the value of carry-forward business was in the range of of Rs 600 crore.With existing system of badla business, the BSE has managed to maintain the daily turnover which is slightly lower than the National Stock Exchange (NSE). However, as the introduction of the long-awaited derivatives trading will be delayed beyond 1998, the NSE will be major loser. "As of now, speculators on the NSE find it increasingly difficult to trade in view of compulsory squaring up the positon before end of settlement," said an NSE dealer.
Unless the L C Gupta Committee comes out with a comprehensive regulation, SEBI would notbe able to approve derivatives trading and the introduction could be delayed. "Against this background, the NSE will suffer as there is no hedging mechanism on the exchange," brokers said.
Due to the absence of institutional business on the stock markets following the South Asia crisis, more and more domestic operators are now participating in the carry-forward business. Main counters like Bajaj Auto, BPL, Castrol, ITC, Reliance, Seas Goa, SBI, Telco, Tata Tea and Tata Steel are showing increased outstanding value, indicating strong speculative activities.
Although SEBI chairman D R Mehta had announced that futures and options in securities would be introduced by March 1998, the L C Gupta Committee has failed to come out with any comprehensive guideline so far. "This means derivatives trading in the country will be delayed," said a broker.
If the BSE again requests SEBI to review the present system regarding removal of the twin track system -- whereby in the A group scrips are not segregated intocarry-foward and delivery -- the badla system will get a further boost. Already, the BSE has expanded its trading centres to over 300 cities. With several steps taken by the BSE in the recent past, speculators will opt for the BSE. According to BSE president M G Damani, the BSE has strengthened its risk management system by taking various measures to maintain market integrity and avert payment defaults. Ever since the introduction of online trading system at NSE and BSE, which ensures complete transparency of system, operators are more interested in doing speculative business than investment.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
