Gupta moots rolling settlement

quot;A frantic effort is on, presumably with SEBI8217;s blessing, to perpetuate the badlasystem even while adopting a rolling settlement,quot; Gupta, who was also the chairman of SEBI-appointed derivatives committee said.

quot;Once demat has been adopted, there appears to be no valid reason for delaying rolling settlement,quot; Gupta said. SEBI8217;s earlier argument against rolling settlement was that it is not possible in paper-based trading, he added. Welcoming the Union Cabinet decision to clear the derivatives bill, he said with the introduction of index futures on stock exchanges, the investor will have a hedging tool.

He said with the introduction of the derivatives trading, the investor could eliminate the market risk. quot;It is the risk arising out of the rise and fall in the overall market which the investor cannot eliminate by buying individual stocks,quot; he added.

However, by buying the index futures, gains/loss arising out of individual stock markets can be eliminated, he said. On the current state of the stock markets, Gupta felt that markets were overpriced based on the price-earning P/E ratio.He said P/E ratio of 24 for BSE 100 and 21 for BSE 30 index was much higher than the average P/E ratio in the Indian market. Gupta, who has done a study on P/E ratio in Indian markets, said any ratio above 18 was considered overvalued. In this regard, he said the same thing had occurred in the 1999 fall and in 1994, when the P/E ratios were much higher than average levels.