Extension of trading hours by BSE & NSE

All the parties in this story seem to have acted in connivance and played to their respective galleries.

The Plot:

SEBI announced that equity and derivatives markets may remain open from 9am to 5pm. Opinion polls were conducted and it was found that the majority was against extending trading hours. The noise stopped. Suddenly, out of nowhere, BSE announced that it would start trading from 9.45am. In the game of one-upmanship, NSE declared as a counter-measure that it would start trading from 9am. BSE then announced that it also has no option but to start trading from 9am. The date was set as 18 December 2009. Afterwards the date was postponed to 4 Jan 2010 to compassionately give enough time to brokers to prepare themselves.

This story sounds like the Headley-Rana plot in a wannabe thriller. All the parties seem to have acted in connivance and played to their respective galleries. The next part of the plot would unfold with MCX starting its exchange and as a USP, announcing that it would trade from 9am to 5pm. BSE and NSE would follow suit, saying that they had no other option. Thus, the autocratic SEBI would achieve its objective, having remained a mute spectator.
The Rationale:
The main reason cited for extending trading hours is that SGX Nifty starts trading in Singapore earlier and so it snatches away a lot of business from India. Has any study been conducted as to how much Nifty volume is traded on SGX before 9.55am and after 3.30pm and how much during Indian timings? One understands that the volumes are insignificant except on rare occasions when there is major global turbulence. Moreover, SGX starts trading from 6.30am IST. So would NSE/BSE consider starting trading from 6.30am in future? What if (and hopefully so) Nifty is listed on London and US exchanges? Would then SEBI allow trading up to 1.30am IST to match US timings so that the volumes remain in India?

The other reason for the extension is that NSE and BSE are profit-making organisations and they have to maximise shareholder value. In that case, they should ideally keep the markets open for 12 hours or more, or maybe even 24 hours, since the trading is electronic. Should the BSE not take the opinions of market participants who are also minority 49% shareholders?

One other reason is that the extension will facilitate FIIs to trade more and will suit their timings. Are we Indians still slaves to the foreigners? Should we not bother about our inconveniences as well? Why is the Hong Kong market open only for four hours? 

The Problem:
So what is the practical problem if the markets open early?
The stock brokers’ offices do not function like other offices where 9am timing means that the staff has to report by 9am. They have to report at least an hour or two early and prepare for the day’s work, like checking bank accounts, client accounts, margins, news analysis and research, taking orders, etc. In metro cities especially, the staff has to commute long distances and so it is physically very difficult to cope up. The big brokers can run their offices for 24 hours but the small brokers cannot match that at all. So this move will be against the interests of small brokers who typically service small investors. 

The most important problem is lack of back-up infrastructure. We live in a country where even now cheques are cleared in 48 hours. Small investors live in places where they have accounts in cooperative banks and not in private banks like their counterparts in metros. First, the banking and depository infrastructures have to gear up to meet the demands of the extended trading timings. RBI, NSDL, CDSL, all the banks and all the depository participants (including many banks) have to start functioning from 9am, otherwise there could be a serious timing mismatch leading to disastrous situations. Since 2004, due to increasing globalisation and volatility, indices have hit lower or upper circuits many times, almost averaging once a year. In such cases in future when the markets open in circuit, the brokers or traders/investors may be having enough funds in their bank accounts or having enough shares in their depository accounts, but due to the mismatch in timings they may not be able to transfer funds/shares in time. They would then be declared defaulters for no obvious fault of their own and their outstanding positions may be compulsorily squared up, leading to huge losses and disputes with clients. Who will claim responsibility for such losses? Will SEBI, BSE or NSE compensate the brokers and investors? 
It is quite evident that SEBI, BSE and NSE have not applied their mind properly and, without taking into account the infrastructural and procedural difficulties and the opinions of market players, have gone ahead to implement this idea to suit their interests and their autocratic attitude. A similar situation had arisen when SEBI had almost decided to implement T+1 settlement but sanity had then prevailed. We hope that this time too, some degree of sanity prevails and this arrogant decision is reversed without making it a prestige issue.


Organised retail feels the pangs of recession in 2009

Although the UPA government decided to keep Western multi-brand retail chains off from the country's $450-billion retail market, nobody is complaining. The recession-battered global majors were busy securing existing operations elsewhere

India's retail industry boom gave way to despair in 2009 as consumers held back big spending, forcing some companies to restructure finances, while recession-battered Western retail chains would have felt glad they were not allowed to set up shop, reports PTI.

Although the United Progressive Alliance (UPA) government returned to power, minus the push and pulls of Left parties, it decided to keep Western multi-brand retail chains off from the country's $450-billion retail market. But nobody was complaining, as the recession-battered global majors were busy securing existing operations elsewhere.

One estimate suggests that nearly 5,700 retail stores would close down this year in the US alone.

The fact that the slowdown had entered the domestic retail trade became evident when one of the earliest players, budget-retail chain Subhiksha Trading Services Ltd (Subhiksha), went bust. Not long after, north Indian chain Vishal Retail went for corporate debt restructuring. Others such as Mukesh Ambani-run Reliance Retail and Kishore Biyani-led Pantaloon went slow on expansion or even downsized operations.

Though the last quarter saw a bit of confidence returning to the marketplace, overall, the year remained challenging. There were no estimates, however, of how mom-and-pop stores fared through the year.

While Indian companies tread cautiously, the world's largest furniture maker Ikea scrapped plans to enter the country, citing the government's restrictions on foreign direct investment (FDI). The Swedish retailer was planning to enter the single-brand retail segment, where 51% FDI is allowed but it wanted further relaxation of the rules.

The last quarter, around the festive season, saw a bit of consumer confidence returning, with some retailers announcing expansion plans for the coming year.

The year started off with Chennai-based retailer Subhiksha going bankrupt and downing the shutters of all its 1,600-odd stores across the country due to a severe liquidity crunch. With its lenders running for the company's skin and over 5,000 employees on the street, Subhiksha sought a corporate debt restructuring (CDR) exercise. But, that remains inconclusive and the firm now faces a slew of cases filed by its suppliers in the Madras High Court on winding-up petitions.

Reeling under a Rs730-crore debt, Delhi-based supermarket chain Vishal Retail also went in for a CDR in November. Earlier in the year, it had already halted all expansion.

Even the country's largest retailer, the Kishore Biyani-promoted Future Group, faced a crunch and went in for restructuring of its operations and merging them under six verticals. A few months ago, it announced plans to hive off its supermarket chain Big Bazaar as a separate entity and list it on the market by the end of the current fiscal. Mr Biyani said that the company will open 155 Big Bazaar stores by 2014, increasing its total network to 275 stores.

Besides, its subsidiary, Pantaloon Retail, will invest Rs360 crore this fiscal to add up to 2.4 million sq ft of retail space. In November, the company raised Rs500 crore through a qualified institutional placement (QIP) and is looking to raise some of the money for expansion.

But as the confidence began to return in the last quarter, with the economy showing signs of growth, retail players started unveiling expansion plans for the coming months and years.

Mr Biyani hopes to make Future Group a Rs25,000-crore entity with a total retail space of 30 million sq ft.

Bharti's single-brand retail chain 'Easy Day' continued expansion across north India. It plans to have 200 outlets in place by the end of next year, up from 70 currently.

Koutons Retail, a leading apparel chain, said that it will amalgamate various formats under the brand of 'Koutons Family Store' and plans to add another 100 outlets by March. Shopper’s Stop will invest Rs250 crore in opening 15 new supermarkets in the next three years.

The Franchise India 2009 Summit in November saw participation from over 200 Indian and foreign retail players, with many of them unveiling plans to invest big in India.

During the summit, Australia's largest retail chain, Retail Food Group, and Thailand-based restaurant-chain Minor Food Group announced plans for India forays by 2010.

Meanwhile, in the wholesale cash-and-carry segment—where 100% FDI is allowed—foreign players like Wal-Mart saw fruition of their much-awaited plans.

Wal-Mart, the world's largest retailer which has a joint venture with Bharti Retail, opened its first 'Best Price Modern Wholesale' store in May this year at Amritsar. The joint venture plans to open 10-15 hypermarkets by 2015.

However, French supermarket chain Carrefour, which earlier planned to start its wholesale cash-and-carry business by mid-2009, postponed the foray till 2010. The company is yet to announce details of its proposed Indian operations.


Indian five-rupee coins being turned into razors in Bangladesh

Indian five-rupee coins are being smuggled into Bangladesh to be melted down for making six razor blades, which then are sold at Rs2 a piece

Five-rupee coins are being smuggled into Bangladesh from India to be melted down for making razor blades. Six razor blades can be made from a single five-rupee coin. According to police sources, each blade is sold for Rs2, reports PTI.

"This has been going on for quite some time now. We are looking into it," said HR Khan, executive director, Reserve Bank of India (RBI).

"We are now changing the metallic content of the five-rupee coin so that the new ones will not be lucrative for melting. The new metallic content of the cupronickel coin will reduce its attractiveness for smugglers," Mr Khan said.

The RBI has been coordinating with the police and other authorities to ensure that coin smugglers do not have a free run. Periodic instructions were being given to security and intelligence agencies to check the menace, Mr Khan said.

According to bank officials, the smuggling has contributed to the shortage of small coins.

"We are aware of the problem and the RBI is taking initiatives. We are trying to distribute coins through post offices. We have also told the banks to distribute an adequate number of coins," Mr Khan said.




7 years ago

i think Bangladesh do good with Indian coin

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