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Notwithstanding the introduction of 100 per cent peak margin from September 1, the equity markets remained highly volatile with trading volumes showing a mixed trend on the BSE and the NSE amid large scale profit-booking.
The average daily trading volume on cash segment on the BSE has been on a decline from ₹6,815 crore in June to ₹5,525 crore in July and further to ₹5,199 crore in August. On Wednesday, volumes dipped to ₹4,340.36 crore.
However, on the NSE, intra-day trading seems to be unaffected, as turnover increased to ₹68,756 crore on Wednesday as against daily average volume of ₹68,122 crore in August and ₹68,178 crore in July. However, in June, the NSE logged a daily average volume of ₹77,483 crore. The benchmark BSE Sensex closed with a loss of 214 points at 57,552 after touching a high of 57,625 and low of 56,859.
‘New normal’
Anand James, Chief Market Strategist, Geojit Financial Services, said peak margin has done away with extra leverage offered earlier, but the trade is moving to a new normal with margin pledging becoming popular.
“On day one of 100 per cent peak margin, there was pressure at the client’s end with staff clarifying on several conflicting messages that were floating in the social media,” he said.
To impact gradually
KK Maheshwari, President, Association of National Exchanges Members of India said the new peak margin will lead to a gradual decline in trading volume over period of time and reduction in intra-day position in the derivatives segment.
There will also be a shift in trading volume to options from the futures segment, as market participants will try to extract better leverage. “Long risk trade will get converted to higher risk trade with deeper stop-loss,” he said.
Under the new peak margin norms, which has received widespread criticism from market participants, traders have to set aside 100 per cent margin upfront for their trades instead of 75 per cent earlier. Stockbrokers have to collect minimum margins on leverage-based trade upfront. Earlier, margins were collected upfront and calculated on the basis of the end-of-day positions. However, with the norm, exchanges are mandated to randomly select 4 times in the day to take snapshots of all margins, the highest margin of which will become the peak margin.
Sebi had introduce the peak margin norms to curb speculative trades and restrict leverages offered by stockbrokers to their clients.
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