The Hindu Business Line : Brokerages take preventive step to ward off margin call threat

Large and medium sized broking firms today took preventive action to avoid any adverse fall-out on the margin front in case the market witnesses a tumble tomorrow also. A quick and random survey by Business Line suggests that brokin g outfits in Mumbai, Kolkata, Chennai and Ahmedabad with clients having exposure in future and options market either prodded investors not to go in for fresh exposure during the session today or reduce their positions to a manageable level.

Officials in the brokerages said that they had proactively guided the investors so that no serious client defaults emerge if the US market falls this evening.

Says Mr V.K. Sharma, head of Anagram Stock Broking: “We asked our clients to cut positions and not allow fresh position-building. An official with Angel Broking also said that the firm took a similar stance.

Mr Sharma said as the market opened sharply down from Tuesday’s close and continued to drift down, investors and traders hardly had any opportunity to make honourable exits during the session.

The stock exchange and SEBI officials indicated that the situation was being closely monitored. Hey, however, declined to comment at this stage.

In May 2006, the market regulator had to intervene and trading was halted for an hour to allow cool off time as large scale margin calls complicated the situation. In February 2006, the market corrections, however, did not lead to such a scenario.

Mr Sanjit Sen, COO of BMA Wealth Creator, said NSE pay-in tomorrow at 9.30 am would be crucial if the market opens with a substantial downward gap.

A senior official with an overseas institution felt a serious fall tomorrow cannot be ruled out as more and more global financial market segments and players seemed to be getting sucked into the trouble which originated in the US sub-prime property lending markets.

A few market experts aired concern over the role of the hedge funds active in India, wondering whether that may accentuate a fall.

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