Another whammy for stock markets in the offing - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

Another whammy for stock markets in the offing

Mar 27, 2000

The stock markets have received a drubbing in post budget trading, losing over 800 points. The pessimism was compounded by Sebiís decision to increase the cash component of margins deposited by brokers with the stock exchange. The Sebi had rolled back its guidelines pertaining to the cash component in order to stem the slide on the bourses. Now, however, a committee set up by the Reserve Bank of India and the Sebi has recommend that the margins charged for providing bank guarantees be hiked from the present average level of 10 - 15%. The move if implemented is sure to have an adverse fallout on market sentiment. But the move is nonetheless desirable.

Although the higher margins will mean that the effective costs of funds will be higher, it will also imply a higher degree of safety from the bank point of view (as the collateral value is higher). The borrowers on the other hand may be tempted to use their own funds in view of the higher costs.

In case of stock markets, the move is all the more significant because the borrowers will have to either repay debt or provide additional security. This would lead to a drain of resources from the market (implying selling pressure). The move will be equivalent to the Sebiís decision (which was withdrawn) to increase the cash component of margin money deposited with the stock exchange.

The move is likely to attract howls of protest from stock market participants. But the move is desirable and necessary, especially with the view of improving the financial health of the banks.

Equitymaster requests your view! Post a comment on "Another whammy for stock markets in the offing". Click here!

  

More Views on News

The Top 6 Artificial Intelligence Plays in India (Views On News)

Dec 6, 2021

Investors looking to tap into AI theme need to keep an eye on tech firm leveraging the power of AI are making things possible.

6 Penny Stocks that Rallied 1,000%+ in One Year (Views On News)

Dec 6, 2021

These penny stocks shed their penny status by surging 1,000% or more in the last one year.

6 Popular Stocks that Turned into Penny Stocks (Views On News)

Nov 27, 2021

A look at popular stocks that crashed big time and never recovered, i.e. which went from 'Multibaggers to Multibeggers'.

Will the Omicron Variant Scare Put the Spotlights Once Again on Gold in 2022? (Outside View)

Dec 8, 2021

Rounaq Neroy against the backdrop of the virulent Omicron variant explains what are the factors that would put the spotlights once again on gold.

Will Your Monopoly Stock Rise or Fall? (Profit Hunter)

Dec 8, 2021

Not every monopoly thrives forever. On the contrary, many go downhill or even fail.

More Views on News

Most Popular

Infosys vs TCS: Which is Better? (Views On News)

Nov 26, 2021

In the post pandemic era, the top two IT companies in India are fighting to capture the growing demand for IT.

6 Popular Stocks that Turned into Penny Stocks (Views On News)

Nov 27, 2021

A look at popular stocks that crashed big time and never recovered, i.e. which went from 'Multibaggers to Multibeggers'.

India's Top 5 Monopoly Stocks to Watch Out for (Views On News)

Nov 30, 2021

These 5 companies dominate their sectors with a huge piece of the pie.

6 Penny Stocks that Rallied 1,000%+ in One Year (Views On News)

Dec 6, 2021

These penny stocks shed their penny status by surging 1,000% or more in the last one year.

The Biggest Winners and Losers in India's Transition to Electric Vehicles (Profit Hunter)

Nov 26, 2021

How India's EV transition could be a major headwind for the incumbents.

More

Become A Smarter Investor
In Just 5 Minutes

Multibagger Stock Guide 2022
Get our special report Multibagger Stocks Guide (2022 Edition) Now!
We will never sell or rent your email id.
Please read our Terms

S&P BSE SENSEX


Dec 8, 2021 01:07 PM

MARKET STATS