The BJP has long been seen by markets as being more investor-friendly than the Congress party, spurring hopes Modi will revive an economy growing at its slowest pace in a decade. The hopes have sent sectors such as infrastructure and banks sharply higher. Foreign investors have also bought in heavily, and now own a record 22 per cent of companies listed on the NSE, according to Morgan Stanley data, after buying a net $20.1 billion last year and about $4.3 billion so far in 2014. However, that high a level is raising concerns of possible destabilizing foreign outflows that dent both the currency and shares. A scenario of stock market volatility and huge volumes would mark the first major test for trading-system improvements made by Indian exchanges after a slew of fat finger incidents hurt confidence. In a bid to prevent cases like a 2012 misplaced order that caused the NSE to plunge more than 15 per cent, stock market regulator SEBI in September revised rules for circuit breakers. These allow for a more measured and more flexible response to sudden market movements. An official of SEBI told Reuters last week that it asked exchanges to conduct stress tests to simulate a surge in trading volumes and volatility, including circuit breakers. We need to ensure that the pay-in and pay- out obligations are met in such an event, and that the exchanges can handle a sudden surge in volumes, said the official, who declined to be identified. A spokeswoman for NSE declined to comment. A spokesman for BSE, the oldest exchange, said I am not aware about any special communication from SEBI. I will check on that. But all systems are checked before market hours. Higher margin requirements An official at MCX-SX, Indias smallest stock exchange, said all three stock exchanges in India have been asked by SEBI to check their trading systems, and had met regularly with regulators over the previous two months. (Trading) systems have been checked and geared up accordingly, the offical told Reuters, declining to be identified because he was not authorised to speak to media about it. The MCX-SX did not reply to a written request for comment. Ahead of the election results, Kotak Securities has increased margin requirements for retail investors by 10 per centage points to 30 per cent of outstanding exposure to markets, while limiting funding for those trading with borrowed money, according to several customers who say they were informed of the change. Kotak Securities declined to comment, as did Kisan Ratilal (KR) Choksey and Geojit BNP Paribas, two other brokerages with customers who said stiffer margin requirements have been imposed. A fourth brokerage, Sharekhan, confirmed having raised margin requirements. For some investors, caution about leverage could prove necessary. The valuations suggest expectations are running high, so even a slight disappointment after the final outcome could prove disastrous, said Walter Rossini, who manages the 130 million euros Gestielle Obiettivo India Fund in Milan.
Posted on: Sat, 10 May 2014 15:09:32 +0000
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