13 May, 2021

Options In Future: Zilch

It's got its Penigra, but the Sensex is still down. Why? The cash crunch from the badla ban.

Options In Future: Zilch
As if the Ketan Parekh crisis was not enough!" explodes a stockbroker, "we have now been dealt with another body blow." And this time around too, the watchdog Securities and Exchange Board of India (sebi) is to blame. By banning badla (or carry-forward, the age-old margin trading system on Indian exchanges) from July, sebi thought it would help restore investor confidence as well as business. But exactly the opposite has happened. Volumes have crashed, brokers are switching off their terminals in panic, the Sensex is trying its best to float and the government, deep in the US-64 mess, is facing a wall.

Why has the ban on badla hit the markets so badly? On average, only about 10 to 20 per cent of the share transactions result in deliveries. The rest are carry-forwarded. As a result, since July 2, volumes have dipped by nearly 90 per cent over last year. From an average of Rs 12,000 crore a day last year, trade volumes are down to less than Rs 2,000 crore. In the specified share section, volumes have slumped from Rs 14,000 crore in February to Rs 800-900 crore now. Says Sudhir...

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