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BIG TRADERS having lost a fortune in the last three days? mayhem at the bourses have started running for private money lenders to bail themselves out of the crash.india Updated: May 24, 2006 00:31 IST
BIG TRADERS having lost a fortune in the last three days’ mayhem at the bourses have started running for private money lenders to bail themselves out of the crash.
A major brunt of the financial losses, was, in fact, being borne by local brokers who financed big traders either through bank loans or through their own kitty to take positions in stocks worth crores of rupees in both the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE) just before the market came crashing down in the country.
“Most traders and brokers are trying to tide over the payments crisis through mutual discussions. This is imperative as those brokers who have still not met margin calls could have their trading terminals closed by the stock exchanges.
But, we feel that the brokers would not let this happen as market is on the upswing and they would have already squared up most of their deals in the past two days,” says president of the UP Stock Brokers Association Sushil Kanodia.
He said there was still need for a separate trading platform called Indo-Next which could serve as a parallel trading platform alongside the BSE and the NSE as a cushion against any crash in the two exchanges, Kanodia adds.
The local brokers fear that credit managers of scheduled banks from where the money was borrowed for financing a client’s trading activity under the traditional margin trading mode might pressurise them to pay back the loans instead of offering them more credit at the earliest.
As far as scheduled banks in the city were concerned, none of them approached by HT Lucknow Live had received requests for loans during the past 24 hours from either brokers or traders. However, there were at least three private financiers who had received phone calls from traders inquiring about the possibility of getting a loan to tide over payment problems in the bourses.
“A payment crisis is a hard fact for any broker to contend with in case of any major crash in the bourses. There are already instructions issued by the Union Finance Ministry to the Reserve Bank of India (RBI) for infusing more liquidity into the markets for brokers to answer their margin calls. The credit picture would become more clear in the next two days,” says regional head of Sharekhan Mradul Verma.
He said many brokers were approaching their counterparts in Mumbai or local financiers for arranging cash to compensate for the losses incurred during the past three days. “If a stock deal is made in the bourses, no broker can escape payment commitments with the stock exchanges,” Verma adds.