Looking Back At Vikram Samvat 2053

Samvat 2053 was a year of promises delivered but failed expectations for the broking community. Two of the contentious issues - modified carryforward trading and BOLT expansion - were resolved only towards the last quarter of 1997.

Wile trading in Samvat 2053 ended at the Bombay Stock Exchange (BSE) on October 27, trading in the new year will commence from today.

Yet, towards the end of the calendar year, there is grim news to look forward to for the traders. Competition within the broking community has crossed the cut-throat level. Keeping aside bank offerings, the primary market still shows no sign of revival, and the overpowering shadow of foreign institutional investors (FIIs) in the markets seems to be lengthening further with each day.

 

The stockmarkets are still grappling with the problem of bad paper. And till no solutions are found, the retail investor will stay away from the market.With the primary market virtually dead, marker intermediaries have resorted to selling alternative financial products.

Top BSE officials agree that the market should ready itself for a huge shakeout. The general feeling is that there are too many medium/small-sized brokerages with little business to sustain them. However, the exchange, which is perceived as safe, is expected to gain an advantage over other SEs in the next year.

During the year, the National Stock Exchange (NSE) also had its taste of bad paper with the incidence of fake and forged shares and broker defaults increasing compared to previous years. At the peak of their protest against the controversial indemnity bond issue, the trading members at the NSE threatened to walk out of the exchange. Later, the exchange gave an option to the members to surrender their cards which resulted in 17 members surrendering their membership since the scheme was announced on August 1, 1997.

The previous Samvat had witnessed, for the first time in the history of the BSE, the parliamentary standing committee on finance inviting the exchange's views on the working of capital markets. In December 1996, the revenue secretary visited the exchange to study measures to be taken for reviving the capital market.

By last year, after sweeping changes in arbitration, auctioning and surveillance mechanisms, the BSE was elevated from an associate to an affiliate member of the Federation of International Stock Exchanges.

The BSE On line Trading (BOLT) expansion was finally kicked-off with its inauguration by finance minister P Chidambaram on August 30. The initial Sebi clearance for the expansion had come in on October 29, 1996. By October 1997, the exchange had spread across 99 cities, all of which were non-exchange cities. The jump in trading volumes would be something the exchange can be proud of. For, it has moved up five-fold from the level of Rs 200 crore in April 1996 to over Rs 1,100 crore in October 1997.

The modifications in the revised carryforward system were announced on October 15 after months of uncertainty. Finally, badla has come back with no scrip-wise sub limits, but the market has accepted it grudgingly because only minor irritants have been removed.

Says BSE president M G Damani, "It has been an eventful year. With BOLT and badla back, traded volumes are higher without much support from upcountry centres (Rs 125 crore in value terms). The future of the exchange looks better. Though there is scope for everyone to increase business, it will be a slow and steady growth, and will not be automatically reflected in everybody's books."

Corporatisation has taken off with the exchange having cleared 125 applications, including 13 foreign brokerages, till now.

Samvat 2054 should kick-start trading in the depository segment. With the regulator calling for compulsory settlement of trades through the demat route for mutual funds, domestic financial institutions and FIIs, the depository is expected to become successful over the next 8-9 months.

Safety at the Indian stock markets, however, remains elusive. It is hoped that the regulator would seek to put some of the Chandrashekaran Committee recommendations, relating to signature guarantee and medallion fixing, in place to ensure safe trading.

It is also hoped that Sebi will, at some point of time, initiate the process of moving towards international norms of settlement on the cash side. This process could be smoothened when uniform settlement norms for all SEs are implemented.

The market is hopeful that stock lending, outside of the carryforward trading system, will be back in vogue. A section of the market has suggested that a wider form of securities lending be introduced to allow people to trade on margins.