What do higher carry forward charges imply? - Views on News from Equitymaster

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

  • MyStocks


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

What do higher carry forward charges imply?

Jun 8, 2000

That carry forward charges are on the rise is doubly important for investors. First, it signifies that buying interest is on the rise. And second, higher rates themselves offer an investment opportunity. With respect to carry forward charges the BSE has seen it all this year. Early in January carry forward positions rose in excess of Rs 40 bn. This drove up rates to over 30%. Then came the sell off in the markets and the consequent erosion in long positions. At its low badla rates were a pathetic (attractive for some!) 1% per annum. Now, however, things have once again started to look up.

Two weeks back, the BSE witnessed a near doubling of rates to 12%. Last week the carry forward charge was put at 11%. However what is interesting to note is that the corresponding charge on the NSE (Advanced Lending and Borrowing Mechanism - ALBM) has risen very sharply this week. The mean is well in excess of 20%.

Higher rates result from, as economics would tell us, a demand supply mismatch. In recent days there has been no dramatic alteration in liquidity. If at all there has been a marginal cut back in liquidity by the RBI in view of its initiatives to prop up the value of the Indian Rupee. Demand for securities on the other hand seems to be on the rise. Momentum investors have been actively building up long positions. The markets have risen approximately 800 points from their recent lows. The sentiment is bullish (though some are still 'cautious').

So the rising carry forward charges are definitely telling us something. While it is difficult to say with surety whether or not the markets will rise, higher charges nevertheless offer an interesting investment opportunity by themselves.

Equitymaster requests your view! Post a comment on "What do higher carry forward charges imply?". Click here!


More Views on News

These Stocks Have Rallied Over 300% In the Last 12 Months. Is the Rally Justified? (Views On News)

Nov 12, 2021

As many as 150 stocks from the BSE 500 index deliver multibagger returns in the past one year.

Ultimate Guide to Hedging Your Portfolio (Fast Profits Daily)

Sep 21, 2021

How can you protect your portfolio in a market crash? Find out in this video.

Ride the Indian Real Estate Revival with this 'Different' Smallcap Stock (Profit Hunter)

Mar 23, 2021

Affordability in the housing segment has never been so good in last one and a half decade. Here's how you could make the most of it...

My Latest Stock Recommendation (Fast Profits Daily)

Oct 9, 2020

How I picked an exciting stock using trends from both the commodity and equity markets.

Data is the New Oil but It's Also the New Sugar. Here's How to Fight it (Profit Hunter)

Jun 1, 2020

Is too much data hurting your quest for market beating returns?

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.

This Multibagger Stock Zooms 20% After Dolly Khanna Buys Stake (Views On News)

Nov 24, 2021

Shares of this edible oil company zoomed over 50% in three days after ace investor bought around 1% stake.

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'.

MobiKwik IPO Opens for Subscription Soon. Key Things to Know Before Subscribing. (Views On News)

Nov 20, 2021

The Rs 19 bn issue is set to hit the market soon.

5 Indian Companies Embracing Blockchain Technology (Views On News)

Nov 23, 2021

Blockchain adoption in India was slow in the past. Now, the technology is being well received.


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