Badla Ban May Mean End Of The Line For Some

Several medium to small brokers may be wiped out and the profit margins of large ones will come under pressure in the initial period beginning July 2, because of the introduction of rolling and uniform settlements and the ban on badla, carry forward and stock lending and borrowing.

The 100 per cent cash market which will be operative from July 2 will reduce volumes at the exchanges drastically, bringing down the average turnover to roughly Rs 500-700 crore, which will be one-tenth of the present volumes at their peak.

In the national secondary market, even at the current average volumes of Rs 2,000 crore, foreign institutional investors and mutual funds account for only a third of the total volumes, with the balance coming in from retail investors.

Of the average Rs 1,500 crore retail participation, more than half is trading carried forward either under badla or through the stock lending and borrowing mechanism. Even out of the remaining half, almost 50 per cent accounts for arbitrage business, which will also be wiped out owing to the uniform settlement, market sources said.