Different schools of thoughts have specified different factors that make an impact on the stock market. Among the most important are economic policies in shaping the stock market
Changes in the repo rate have haunted banks for quite some time. Thirteen consecutive hikes in the repo rate have impacted the market badly. Every time when the Reserve Bank of India (RBI) hiked the repo rate, market reacted negatively and went down. Only after the pace of increase of repo rate slowed down market, breathed a sigh of relief. In fact, such has been the impact of the series of monetary policy measures that the stock market in India pays more attention to the moves of RBI than its own regulator SEBI. The table below shows the relationship between stock market performance and repo rate hike.
Crude oil prices are tracked in the Indian economy with lots of curiosity. Since India imports around 80% of crude oil from the international market, any significant change in price of petroleum makes an impact on inflation numbers which in turn impacts the stock market. Inflation numbers send the market up and down whenever they are announced. Post 2008, there has been a consistent inflationary pressure on the Indian economy which has created trouble for the stock market in India. RBI data shows that the period 1995 to 2008 was the best for the Indian economy when inflation overall was just 5%. Between March 2008 and January 2012, it went up and overall inflation number touched 7.6% while primary group had the highest inflation of 13%.
The market, which was disappointed with the policy paralysis of the UPA-2, got a sudden boost with hike in diesel price and FDI in aviation and retail. The government became the darling of the market suddenly and it went up by close to 1,000 points within a few days. Whether it is GAAR or power sector reforms, the market monitors every move of the government. While the government provides strength to the market through regulations, it provides growth impetus with policy announcements.
SEBI decided that Value at Risk margin computation for ETFs that track an index shall be computed as higher of 5% or three times sigma of the ETF, in order to bring efficiency in margining of index ETFs
New Delhi: Market regulator Securities and Exchange Board of India (SEBI) has revised norms for computing the margins applicable for exchange traded funds (ETFs) that track broader stock indices, reports PTI.
Index ETFs are generally a basket of securities that track a particular index.
To bring in more efficiency on calculating margins of index ETFs, SEBI in a circular said it has changed the method of computation.
For computing margins on ETFs, they are treated at par with stocks and margins that are applicable on stocks are applied.
"In order to bring efficiency in margining of index ETFs, it has been decided that VaR (Value at Risk) margin computation for ETFs that track an index shall be computed as higher of 5% or three times sigma of the ETF," the circular said.
Generally, VaR helps to understand the risks related to an investment portfolio.
According to SEBI, the revised margin framework would be only for ETFs that track broad-based market indices and does not include ETFs related to sectoral indices.
Further, to facilitate efficient use of margin capital by market participants, the regulator would extend cross margining facility to ETFs based on equity index and its constituent stocks for offsetting certain positions in cash market segment segments.
The facility would be for ETFs and constituent stocks, ETFs and constituent stocks futures besides ETFs and relevant Index Futures. In all the three cases, it would be applicable to the extent of offsetting the positions of each other.
In the event of a suspension on creation/redemption of the ETF units, the cross-margining benefit would be withdrawn, the circular noted.
SEBI has asked all stock exchanges to take necessary steps for implementing the revised framework.
The changes, which would come into effect from next month, allows fund houses to charge investment and advisory fees on their schemes and levy brokerage and transaction costs