Brokerages revoke restrictions on trading margin, limits

On account of election results, brokers had last week reduced exposures in intra-day as well as delivery based trade to guard against excessive volatility

With the stock markets having passed through the extreme volatility risks posed by general election results, brokerages have revoked the restrictions imposed on trading with regard to margins and exposure limits availed by investors.

Ahead of the election results on May 16, brokers had last week lowered the permitted trading margin and exposure limits for their clients to minimise risks from extreme volatility and any possible systemic risks.

As no such systemic risks emerged in the markets, given robust systems and additional arrangements made by the regulators, exchanges and other authorities, the brokers have now decided to restore the margins and exposure limits to their normal levels.

These brokerage firms, earlier, had reduced exposures in intra-day as well as delivery based trade from May 13 as part of their efforts to guard against excessive volatility on account of elections result.

"Considering the risk and protection of investor's interest on account of elections result volatility, Intra-day exposure is reduced to six times and delivery based trade exposure is limited to two times," Indiabulls Securities had said in a communication to clients.

"This would come into effect from May 13 till further communication," it had added.

The move came as exit polls were predicting victory for the BJP-led NDA in the elections.

After the passage of election results, which have given a clear mandate for the new BJP government headed by Narendra Modi, with sufficient majority, Indiabulls has now informed its clients that "with immediate effect the exposure limits are restored to normal."

Similar circulars have been issued by other brokerages as well to their respective clients.

The BSE's benchmark Sensex surged nearly 650 points on May 9 and again climbed over 550 points on the successive trading day (May 12), when exits polls predicted victory for the BJP-NDA in the elections. It again climbed by 320 points on May 13. The Sensex slipped by 56 points on May 14 and rebounded by 90 points on the next day.

The BSE 30-share index closed with a gain of around 200 points on the results day (May 16), touching a historic high of 25,375.63 points - shooting up about 1,400 points in the intra-day trading.

Market regulator Securities and Exchange Board of India and intermediaries had closely watched volatility in the stock market. Besides, investors had kept a close tab on stock market movements.

Market authorities had also worked to ring-fence systems and infrastructure from any sudden volatility on and around the results day.