SEBI mulls margins on institutional trade

Institutions were so far kept out of margin collection as it was perceived that they operate on a delivery basis. FIs and mutual funds are required to take delivery of the shares they are buying and they are not supposed to square up or short sell shares like other operators. “FIs, mutual funds and FIIs were recently major buyers in themarket. Mutual funds who raised huge sums through various infotech schemes have been ploughing this money into the stock markets,” said a broker.

"We are considering that some margins, maybe to begin with, a flat margin, be imposed on institutional trade," Singhvi said. "We have decided to identify 10 scrips in terms of volatility, volume and outstanding positions in the scrips. At the end of the day, whatever is the brokerwise, scripwise net outstanding position, five per cent additional margins will be taken in these scrips till the end of the settlemennt. This will get effective from Wednesday across stock exchanges," Singhvi told reporters.

The ten scrips are: Zee Telefilms, Infosys Technologies, NIIT, Satyam Computer, Himachal Futuristic, Pentamedia Graphics, Global Telesystems, Digital Equipment (India), Silverline Technologies and DSQ Software. SEBI officials told reporters the additional margins will be effective from Wednesday.

At a meeting of SEBI and five major stock exchanges, it was alsodecided that the cash component of additional capital and margin should be increased and standardised with the cash component reaching level of 50 per cent by March 31, 2000. Stock exchanges would work out a phased programme for its implementation.

SEs were told that they should ensure that brokers are collecting margins from clients wherever the margin liability for clients exceeded Rs one lakh. Exchanges could also carry out inspections among brokers to ensure compliance, it was felt. The current system of volatility margins which captures a six week volatility is to be refined and strengthened to include short term volatility as well. The modalities for this will also be decided within this week.

According to Sebi, with regard to the proposed measures last week, exchanges have already started identifying the outstanding of top 25 brokers, while they are also keeping a watch on scrips where outstandings and volatilities are relatively high.

Sensex zooms to 6150, then tumbles by 226points
MUMBAI: Stock markets snapped a record breaking run as investors and domestic funds booked profits on Monday. After hitting yet another record high of 6150, the BSE Sensex nosedived by 226 points to close marginally lower by about 9 points at 5924.31, ending the five-day long bull run.In spite of various negative factors like the 2 per cent decline in the Nasdaq Composite Index on Friday and the Securities and Exchange Board of India’s directive to the stock exchanges to impose certain restrictions on top 25 brokers, the market opened on a buoyant note. Infosys Technologies continued to be the major driving force in the market as the scrip shot up by eight per cent to Rs 10,759 showing a net gain of Rs 797 from the previous close of Rs 9962.

Infosys was closely followed by others like Ranbaxy, Hindalco, ACC, Mahindra & Mahindra and SBI. As a result, Sensex zoomed to an all-time high level of 6150 in the morning session. However, pivotals like ITC, Nestle, Glaxo, Novartis, MTNL and ICICI metwith heavy selling and moved down sharply and even hit the downward circuit filters, thus pushing down Sensex from the new historic high.

Reflecting the high volatile movement, Sensex opened at 6130 – up by 195 points – and touched the day’s high of 6150.69 points, then dipped to a low of 5923.17 points registering a sharp decline of 227 points before closing at 5924.31 points, showing a net drop of 9.25 points from the previous close of 5933.56 points. A similar trend noticed on the NSE and the S&P CNX Nifty index too reported a drop of about 14 points at 1741.75 points. Analysts and stock brokers ruled out that there was any link between the SEBI measures and the Sensex decline.