Brokers gear up to rein in market risks


MUMBAI: Expecting elevated volatility forward of the Lok Sabha election outcomes on Tuesday, brokers have alerted buyers about elevated risk-containment measures that might get triggered routinely in case of sharp value actions.
“Considering the perceived volatility that could arise due to elections, you are requested to note the (following things),” an advisory from HDFC Securities stated.“Monitor your leveraged positions in equity, equity derivatives segment and MTF (margin trading facility). Ensure that surplus funds are maintained in linked accounts or funds transferred to your trading account or additional shares placed on margin pledge to cover any adverse movements in the market,” the e-mail advisory stated. It additionally stated that intraday buying and selling merchandise would appeal to a minimal margin of 40% for June 4, when the outcomes can be declared.

In the run-up to the election, volatility in the inventory market elevated manifold, with the previous week recording a excessive of over two years. From a multi-year low of 10.2 on April 23, India VIX – the measure of market volatility – touched a excessive of 24.8 on May 31, NSE knowledge confirmed. An advisory from Prabhudas Lilladher stated that to guarantee security and mitigate potential risks throughout ballot outcomes week, it could implement further danger management measures. “These measures will remain in place until post-election volatility subsides.”
Investors ought to be aware measures and changes which will affect buying and selling actions, it stated. Such measures embody margin improve in the derivatives section that can be 10% above the trade’s margin. Margin for MTF merchandise can be elevated by 15% over and above the trade’s obligatory margin. It would additionally scale back the quantity of leverage that merchants can get pleasure from every day. Additionally, the broking home may sq. off positions with loan-to-value ratios of above 80%. “To safeguard your investments, we encourage you to deposit additional margins, especially through fund transfers, to avoid any actions by our risk management teams in response to sharp market movements,” it stated in an e-mail to purchasers.

Nilesh Desai
Nilesh Desai
The Hindu Patrika is founded in 2016 by Mr. Nilesh Desai. This website is providing news and information mainly related to Hinduism. We appreciate if you send News, information or suggestion.


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