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`ALBM/BLESS withdrawal will dampen sentiment further'

Our Bureau

NEW DELHI, July 23

THE Association of NSE Members of India (ANMI) has written to the Finance Minister, Mr Yashwant Sinha, cautioning against a further dampening of market sentiments due to the withdrawal of ALBM/BLESS.

Addressing newspersons here on Monday, Mr V.K. Jain, former President of the ANMI said: ``The volumes in the capital markets has dipped considerably due to the lack of financing for leveraging by investors.'' Market capitalisation has fallen by over Rs 3 ,00,000 crore and prices of certain shares have crashed by as much as 90 per cent.

The Association has said that the decision to withdraw the ALBM/BLESS and the introduction of rolling settlement without providing any other alternative mechanism by which funds can be channelised to the capital market has already hindered the market. Th e situation has been further affected by stoppage of stock lending.

``It is the unofficial badla in Calcutta that had led to the recent stock market crisis and not the badla controlled by the stock exchanges,'' he added.

Derivative products cannot be a substitute for deferral products. ``Options and futures are primarily used for hedging and are not deferral products,'' said Mr Jain.

Mr Jain also stressed on the need to strengthening surveillance by the market regulator, Securities and Exchange Board of India (SEBI). Strict action should be taken against the manipulators of the capital markets. The Association has alleged that there has been a close nexus between brokers and promoters, brokers and FIIs (foreign institutional investors) and brokers and financial institutions. ``The regulatory framework must be strengthened so that such nexus can be prevented,'' Mr Jain said.

The letter has also suggested that the SEBI Board should be manned by experts having large experience in capital markets and investment banking.

The issue of allowing all brokers to participate in the derivatives market was also taken up. ``SEBI has put a halt on any registration in the derivative market and the stock exchanges have provided unreasonable conditions of large deposits and additiona l bank guarantees. The insistence of SEBI and stock exchanges for a separate Clearing Member and Trading Member's registration must be done away with and all the brokers be permitted to trade in derivatives if they are registered as brokers,'' the letter said.

Pic.: BSE brokers meeting the SEBI Chairman, Mr D.R. Mehta, in Mumbai on Monday.

Picture by Shashi Ashiwal