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Marketmen sore over Govt `foot-dragging'

R. Y. Narayanan

COIMBATORE, Sept. 19

STOCK market players are on tenterhooks as to which way the markets would move as the Taliban and the US Government continue to play their game of oneupmanship.

While the measures announced by Government agencies to prop up sentiments in the stock markets are expected to bring short-term stability, marketmen are sore over the `foot-dragging' attitude of the Government in meeting its own commitments relating to e conomic issues.

Speaking to Business Line, Mr D. Balasundaram, former president, Coimbatore Stock Exchange (CSX), said while the RBI announcement of banks being allowed to extend finance for margin trading was welcome, how many stock brokers would avail themselves of it was not clear at present.

Under the margin trading, brokers would have to pay 40 per cent margin while the balance could be met by the participating banks. But under a new rule, investors could pay much less margin and trade in futures in individual shares.

Asked whether banks would be willing to stick their neck out to lend to share brokers in view of the Madhavpura and GTB episodes, he said these institutions had not followed prudent lending norms. Stocks were the most liquid collaterals available and the banks could encash them in case of any default in payment.

But the banks should not prescribe uniform percentage of margins for volatile and stable stocks and use their discretion in deciding the margin quantum depending on the quality of shares pledged.

Mr Balasundaram said the announcements made in the last few days to prop up markets -- like creeping acquisition, hike in FII limit, buyback of shares by companies etc --will come in handy to stabilise the markets. But these were only short-term measures , he added.

For the stock markets to remain healthy, the Government should initiate measures to give a boost to the economy, he added.

Mr K. Annamalai, another former president of CSX, however, was doubtful about the long-term beneficial impact of the announcements. The recovery in the past two days was due to buying support extended by domestic FIs and the FIIs' future strategy was cru cial.

He also felt that the number of banks which were fully equipped to involve themselves in brokers' margin trading were very limited and most of the public sector banks may not aggressively participate unless there was a clear direction from the RBI.

He was also sceptical about share buyback plan keeping the prices afloat.