INSUBCONTINENT EXCLUSIVE:
MUMBAI: India's market regulator on Friday halved position limits for certain stock futures, restricted short-selling of index derivatives
and raised margin rates for some shares in a bid to curb "abnormally high" volatility amid the coronavirus pandemic.
The measures by the
Securities and Exchange Board of India (Sebi) come after markets around the globe have plummeted over the past week as emptying hotels and
airports and closure of malls and offices threatened to bring the world's economies to a grinding halt.
The broader Nifty 50 index saw its
best one-day gain in more than six months on Friday as policymakers across the world launched fresh efforts to stem the economic fallout of
the pandemic, but the index ended the week more than 12% lower.
India's volatility index shot up to levels last seen during the aftermath
of the 2008 financial crisis, closing at 67.10 on Friday.
In case open interest in a scrip exceeds 95% of its position limit, the derivative
contract enters a ban period in which investors can only reduce their positions
So, a lower position limit would automatically push scrips with high open interest into a ban.
About 10-12% of the stocks, mostly volatile
ones, traded in the futures and options segment will be impacted by Sebi's measures, according to Jimeet Modi founder of Mumbai-based
Samco Securities.
Sebi restricted the extent of short-selling of index derivatives by mutual funds, foreign portfolio investors and
proprietary traders to their stock holdings.
"This is like allowing to use steps only to come up but you cannot go down," said Mumbai-based
trader Sovit Manjani, adding that short-selling was an "essential part of markets" and that the curbs by Sebi were "unfair".
Sebi and stock
exchanges were continuously monitoring market developments and would "take any further suitable actions" as required, the regulator
said.
The measures will come into effect from March 23 and continue for one month, Sebi said.
