Payment crisis continues to haunt bourses

The settlement for the last week is not yet over despite the intervention of the BSE top brass. "The ongoing settlement is also likely to create problems as the Sensex has taken further beating. There are no sound fundamental factors which willboost the market in the short term," said a broker, adding that the ongoing payment problem has also raised memories of the securities scandal of 1991-92. "The players in the current drama and the previous one are same," said another broker.

The crisis was triggered off last week when Harshad’s brokers were unable to make the margin payment in the scrips pushed up by this bull cartel. In fact, the prices of these scrips had fallen by nearly 40-50 per cent in the last two weeks. Other brokers and operators who were acting in tandem with the big bull’s brokers were also trapped. This coupled with the sustained FII selling in other counters have now created a crisis situation.

SEBI had last week imposed 10 per cent margin on short sales. With the market falling further today, it has imposed fresh curbs. However, with other Asian markets falling and the rupee taking further beating, the Sensex is set to fall further, thereby complicating the situation. Experts blame SEBI, BSE and NSE for the current mess onthe stock markets. When Harshad’s brokers indulged in excessive speculation and pushed up prices, the exchanges and the regulator remained silent spectators. "They should have come out with measures to stop excessive speculation much earlier. The exchange can impose even 100 per cent margin on scrips. But nothing was done," said a source.

"Sentiments in the local markets will continue to remain at a lower ebb until the pay-in on the NSE and BSE accomplishes a smooth note. We need to reach a point where the market will give out clear signals about its direction," said a BSE director, explaining the uncertainty in the market about where the bottom lies.

NSE managing director RH Patil said that the pay-in for securities, which was in progress throughout Monday, had not sent out any signal of a default. "We would have to see the pay-in of funds, however, to come to any conclusion," he said.

Monday’s sell-off was precipitated by a continuation of delivery based selling and fears of a payment crisis,exacerbated by the margins on short-selling. The near panic over an impending payment crises was caused by the alarming proportion of outstanding number of shares despite the fall in value. "A large number of brokers and traders have been caught with open long positions and absolutely no cushion in the market in the form of short covering. When short sellers are driven out of the market the scope for bulls to unload also disappears. Thursday’s pay in will determine the extent of a payments crisis, if any," said an operator. According to experts, the margins on short sellers should never have been imposed. Long buyers are faced with two difficulties: one, FIIs selling for delivery and two, a market completely devoid of liquidity.

Yet another sop for FIIs

MUMBAI, June 15: Concerned over the sustained selling pressure unleashed by foreign institutional investors (FIIs), the Reserve Bank of India has hiked the trigger point limit for investments in Indian companies by FIIs/NRIs/OCBs under the portfolioscheme by 2 percentage points. This effectively means that the RBI will alert designated banks at 22 per cent and 28 per cent in the case of Indian companies where FIIs/NRIs/OCBs are allowed investment upto 24 per cent and 30 per cent respectively. The new trigger points are likely to generate interest in HDFC, State Bank of India, Satyam Computers, Pentafour Software, Infosys and Bank of Baroda scrips from FIIs. In a late evening press release the apex bank has said that the trigger point for banks has been raised from the earlier 16 per cent to 18 per cent. In yet another step of liberalisation for FIIs the Reserve Bank has decided that transactions among FIIs will no longer require its post facto confirmation.