MUMBAI: Stock prices rebounded — almost with a vengeance — on Wednesday, but it did little to restore confidence among the badly-shaken broking community. Many retail investors who wanted to take advantage of the recent crash, to add shares to their portfolio, were turned away by brokers as they did not have the required credit balance in their accounts.
Barely a week back, the same brokers had relaxed limits generously so as to help their clients load up on shares.
Given the mixed signals from global markets, market participants are keeping their fingers crossed as to how the Sensex would behave in the next few days. The Dow Jones Industrial Index opened 2% lower, even though equity markets across Asia rallied following the US Federal Reserve’s decision to cut interest rates by 75 basis points the previous evening. South Korean shares rose 1% while Hong Kong was up by as much 10%.
The 30-share Sensex soared 864.13 points or a little over 5%, to close at 17,594.07, nearly erasing all of the previous session’s losses. The 50-share Nifty climbed 304.10 points or over 6% to close at 5203.40. While the BSE Midcap and Smallcap indices were up 8% and 4% respectively, declines outnumbered advances at 14:13.
Reliance Power seeks SEBI nod for early allotment to QIBs
Back home, trading in 1,003 stocks (out of the 2,700 stocks traded on Wednesday) was frozen after there were only sellers at these counters.
Retail investors who were being wooed by brokerages till some days back suddenly found out that they were no longer as welcome. Only clients who were able to make their payments through high-value cheques or demand drafts were being entertained.
Brokers said that this was necessary to prevent any default in the system. They have suddenly become conscious of the creditworthiness of their clients.
“If the client enjoyed good relations with the broker and had a good payment history, he got preferential treatment. People who have paid the cheque on Wednesday, would otherwise be able to buy on Friday or at perhaps even Monday once the cheque is cleared,” said Ketan Malkan, VP-HNI Desk, India Infoline.
High-value cheques are those with a denomination of Rs 1 lakh and above. These cheques have to be deposited before 11 am, and by 2 pm, the payee will get to know if the cheque will be honoured or not. This facility is available only in select locations in big cities. In Mumbai, this facility is not available at bank branches in distant suburbs.
“Most of the clients did not have credit balance as whatever limit they had before the market crash was utilised,” said Amitabh Chakraborty, president-equities, Religare Securities.
“But when the markets fell, the positions were squared off due to additional margin requirements if the clients could not pay in time,” he added.
The recovery in major indices notwithstanding, dark clouds continue to loom. Corporate earnings from key US companies continue to be dismal, commodity prices are slipping, and the yen has strengthened as investors are cutting back on their carry trades — which, in turn, could spark a vicious circle of selling as spreads shrink.
Barely a week back, the same brokers had relaxed limits generously so as to help their clients load up on shares.
Given the mixed signals from global markets, market participants are keeping their fingers crossed as to how the Sensex would behave in the next few days. The Dow Jones Industrial Index opened 2% lower, even though equity markets across Asia rallied following the US Federal Reserve’s decision to cut interest rates by 75 basis points the previous evening. South Korean shares rose 1% while Hong Kong was up by as much 10%.
The 30-share Sensex soared 864.13 points or a little over 5%, to close at 17,594.07, nearly erasing all of the previous session’s losses. The 50-share Nifty climbed 304.10 points or over 6% to close at 5203.40. While the BSE Midcap and Smallcap indices were up 8% and 4% respectively, declines outnumbered advances at 14:13.
Reliance Power seeks SEBI nod for early allotment to QIBs
Back home, trading in 1,003 stocks (out of the 2,700 stocks traded on Wednesday) was frozen after there were only sellers at these counters.
Retail investors who were being wooed by brokerages till some days back suddenly found out that they were no longer as welcome. Only clients who were able to make their payments through high-value cheques or demand drafts were being entertained.
Brokers said that this was necessary to prevent any default in the system. They have suddenly become conscious of the creditworthiness of their clients.
“If the client enjoyed good relations with the broker and had a good payment history, he got preferential treatment. People who have paid the cheque on Wednesday, would otherwise be able to buy on Friday or at perhaps even Monday once the cheque is cleared,” said Ketan Malkan, VP-HNI Desk, India Infoline.
High-value cheques are those with a denomination of Rs 1 lakh and above. These cheques have to be deposited before 11 am, and by 2 pm, the payee will get to know if the cheque will be honoured or not. This facility is available only in select locations in big cities. In Mumbai, this facility is not available at bank branches in distant suburbs.
“Most of the clients did not have credit balance as whatever limit they had before the market crash was utilised,” said Amitabh Chakraborty, president-equities, Religare Securities.
“But when the markets fell, the positions were squared off due to additional margin requirements if the clients could not pay in time,” he added.
The recovery in major indices notwithstanding, dark clouds continue to loom. Corporate earnings from key US companies continue to be dismal, commodity prices are slipping, and the yen has strengthened as investors are cutting back on their carry trades — which, in turn, could spark a vicious circle of selling as spreads shrink.
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