Jan 7, 2000|
BSE takes on speculators
The Bombay Stock Exchange (BSE) is heeding to the Securities and Exchange Board of India's (Sebi) advice that the rampant speculation in the markets needs to be curbed. The BSE has imposed stiff margins on information technology and finance stocks.
The move comes after the BSE Sensitive Index (Sensex) witnessed wide gyrations since the start of the New Year. The volatility has been the maximum in the finance and small cap infotech stocks. The BSE has increased the special margins on these stocks from 25-30% to 50%. The margins are to be imposed only on those companies where the stock prices are not in line with fundamentals.
As part of the exercise to contain volatility, the BSE has also reduced the circuit filter to 4% in case of 142 stocks. The exchange has also suspended trading in a number of stocks apart from launching investigations in a few others.
The BSE's move is likely to hit speculators that have been capitalising on the interest in infotech and finance stocks. This move will, however, adversely affect overall market sentiment. This may be due to the fact that momentum investors will take to liquidating position either to avoid paying special margins or to generate resources to meet such requirements. But in the end, the BSE would have been successful (atleast partly) in curbing rampant speculation.
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