Investor Interest   Exclusive
Longer trading hours fails to boost Nifty futures volumes

Both the BSE and the NSE have extended their trading session by about one hour; however, the move has not increased volumes.

The trading volumes of Nifty futures are shrinking irrespective of extended trade timings for the Indian bourses. From 4 January 2010, the market has been opening at 9 in the morning instead of 10, but market participation in the first hour has been extremely low. Also, the total volumes at the end of the day have not increased at all. The number of Nifty futures contracts traded in the first hour of trading was just 50,961 on 4th January, which was the first trading day of the New Year and also the first day of the January futures series. In the whole of that day, 2,37,231 contracts of Nifty futures were traded. This was much lower than the volume on 31 December 2009 (4,00,849 contracts).

The trading volumes of the Nifty futures contract did not pick up thereafter either.

On 5th January, in the first trading hour, the volume of Nifty futures was 86,682; and in the whole day, 3,39,132 contracts were traded. In the next three days, the first-hour volumes were just 46,547, 46,344 and 39,419 contracts, respectively.

On these days, total traded volumes in the whole day were 2,95,156, 3,25,130 and 2,77,090, respectively. Volumes picked up today (Monday, 11th January) but not by much; in the first trading hour, the volume of Nifty futures was 61,396. By the end of the day, 2,50,924 contracts of Nifty futures were traded.

It is clear that the extended hour has made hardly any impact on the trading volumes. The reason behind the early opening was to attract Nifty futures volumes from the Singapore bourse. Volumes declined towards the end of December 2009 as the global markets remained closed on Friday, 25 December 2009, for Christmas and on Monday, 28 December 2009, Indian markets were closed on account of Moharram. Most fund managers were on a year-end vacation and the market also remained closed on Friday, 1 January 2010, on account of the New Year holiday. The number of Nifty futures contracts traded in the first hour of 29 December 2009 was 44,426 while on 30 December 2009, it was 42,770. On 31 December 2009, the first-hour volume was 67,680.

It was expected that volumes would go up in the New Year after one hour was added to trading. However, this has not happened so far. In fact, Nifty futures volumes on some days between 9am and 3.30pm were lower than volumes generated during earlier days when trading was done between 10am and 3.30pm.


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    RIL raises another Rs3,465 crore from treasury stocks

    RIL has raised Rs3,465 crore through sale of treasury stocks for the second time this month amid reports that it has upped its bid to $13.5 billion for Dutch petrochemicals company LyondellBasell

    Reliance Industries Ltd (RIL) on Monday raised Rs3,465 crore through sale of treasury stocks for the second time this month amid reports that the company is upping its bid to $13.5 billion for Dutch petrochemicals company LyondellBasell, reports PTI.

    RIL last week had raised its bid for the proposed LyondellBasell buyout to $13.5 billion from the initial $12 billion offered in November.

    This is the second treasury share sale by RIL this month, taking its total mop-up from the open market to Rs6,140 crore.

    In a regulatory filing to the stock exchanges, RIL said Petroleum Trust has sold 3.30 crore equity shares of the company today. The Trust will realise about Rs3,465 crore at Rs1,050 per share.
    Today's selling price of Rs1,050 was 4% below the prevailing market price of RIL shares. Shares of RIL closed 1.9% down at Rs1,081.55 on the Bombay Stock Exchange, while the BSE Sensex ended 13 points down at 17,526.7.

    RIL had created treasury stocks post its merger with Reliance Petroleum in 2002. After today's sell-off, the Trust holds about 12 crore treasury shares worth over Rs13,000 crore at the current market price.

    Treasury stocks are shares of a company which are not issued to the public and are kept in the company’s treasury to be used to create extra cash whenever needed.

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    Investor Interest   Exclusive
    Bankers differ on provisioning norms

    The mandatory 70% provisioning coverage expected to be implemented by banks has created quite a stir in the banking community

    The major bone of contention emerging among Indian banks is the provisioning requirement mandated by the country’s central bank, the Reserve Bank of India (RBI) in its last monetary policy review. RBI had advised banks to maintain a loan loss provisioning ratio of at least 70% by September 2010. While most see this demand as too harsh and steep, there are some who welcome the move as a step in the right direction.

    The difference in opinion was quite apparent at Monday’s Banking Conclave held by State Bank of India (SBI) and Indian Banks’ Association (IBA) in Mumbai. The issue was discussed at length by luminaries of the financial world. SBI chairman OP Bhatt pointed out some of his reservations against the new norm. He said that although RBI was rightly concerned about the health of the Indian banking system, the reasoning behind arriving at the number (70%) was a bit odd.
    “Earlier the provisioning was fixed separately for the category of asset being provided for. However, the new requirement mandates banks to provide 70% across the total non-performing loans. If this number had come from similar logic, it would have been better. I feel a lot more understanding is required in this area. Some banks would definitely find it challenging to meet this criterion and hence, would need more time. The provisioning requirement should be based on some kind of formula,” he said.

    However, Rana Kapoor, chief executive of Yes Bank, had a different perspective. “In a heightened risk environment since the last couple of years, which has still not been entirely mitigated, the risks in the system are still running high. I feel this is a proactive measure by RBI to send a signal. The timeframe could be somewhat flexible, but I think it is very important that the asset quality continues to be ranked on priority. Banks should administer proactive and dynamic provisioning policies, in advance of assets turning non-performing,” he said.

    Mr Kapoor’s emphasis on asset quality highlighted Mr Bhatt’s own remarks on the current level of NPAs in the banking system. Mr Bhatt, while mentioning the concerns facing the industry, had pointed out that NPAs were running high and that they would continue to rise at least for the next couple of quarters.

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    1 decade ago

    All points of views have some merit. In all this the moral hazard ignored is that the borrowers are getting away by reneging on debts - either the Govt bails them out periodically as in the case of loan waivers or the legal process of recovery of debt is so cumbersome and time consuming, that the banks are forced to go in for compromises, often with habitual defaulters/the influential, and adjust the unrecovered portion against the provisions.They must be happy with higher provisions the banks are asked to make. In fact asset recovery agencies have sprung up and have proved to be profitable. It is time for the RBI to ask banks to be relentless in pursuit of bad debts and for the Govt to prescibe by law that the courts and DRTs must hear all suit filed cases by banks on a day to day basis for expeditious settlement.The society at large and the performing borrowers are paying a heavy price for the non-chalance of defaulting borrowers.

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