Leveraged bets came-off in stock markets sharply on Monday on the resurgence of India-China conflict. Data showed that the Nifty and Bank Nifty open interest (OI), a gauge of high leverage, fell sharply. Nifty and Sensex fell by 2.23 per cent and 2.13 per cent respectively on Monday. Also, the stock markets were expecting poor GDP numbers, experts said.

Reportedly, China has yet again provoked the border dispute and every time this happens, markets fear if the situation could escalate further into military skirmish.

The Nifty fell by 469 points, around 4 per cent, from the high of the day to the low. The Sensex witnessed a swing of 1,615 points from the high point to the low. The derivative data showed that Nifty futures OI that was around 1.35 crore last week came down to 1.17 crore on Monday. The Bank Nifty OI is down to just around 15.38 lakh from around 25 lakh. The Bank Nifty index fell by 3.14 per cent on closing. It swung by around 1,900 points in intra-day day trade from the high point to the low.

“The much awaited stock market correction since the past many weeks is likely to have occurred all at once on Monday. With Nifty touching 11,800 levels, the markets looked overbought. But that is no more the case now. The fall may not be prolonged as the past record of India-China tensions is a thing to go by. Banking and financial stocks could bounce strongly, data and trends suggest,” said Rohit Srivastava, chief strategist, IndiaCharts.

Srivastava is of the view that correction in small and mid-cap stocks too was over for now. The small and mid-cap indices on the BSE and theNSE were down in the range of 2-4 per cent.

New margin too affect mood

Yet another issue that has hung over the markets has been that of new margin norms stipulated by SEBI that will kick-in from Tuesday. In the cash segment, brokers will have to collect upfront margin and they will no longer be able to use power of attorney (PoA), which they did so far for margin purposes.

“SEBI has declined to grant extension of further time in implementing margin process. This came as a big surprise to ANMI and its 900 members. ANMI is holding consecutive meetings with all stakeholders and studying all options available to it in the matter.” said a ANMI spokesperson. ANMI is NSE broker's body.

Brokers told Business Line that many client positions were off-loaded on Monday on the back of additional margin requirements to trade from Tuesday. In the cash segment around 30 per cent margin will now be required to buy or sell stocks.

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