Budget day trading to be costly, margins on rise

Stiff turbulence is expected in the market in the week ahead of budget, if speculations are to be believed. February 28 and March 2, the trading sessions following the budget day would witness heavy rise in the cost of Indian stocks by a margin of 10- 15%, The Economics Times has reported. With market being kept opened on budget day, a scope of volatility in the days to follow has made the stock broking firms plan to hike margin requirements.

While the margins might increase from 10-15% to 20-25%, some broking firms are considering raising the margins in the cash segment also.
CJ George, managing director, Geojit BNP Paribas Financial Services said, “We will be asking clients to provide additional margins, especially for the derivatives segment as we expect high volatility on Budget day.”

The risk management teams of some broking firms are learnt to be deciding on the margin requirements for the days following the budget.
The ET report further mentioned that markets will be monitored by surveillance team of The Securities and Exchange Board of India (SEBI) on the day of budget. In case, something goes amiss, the market analysts believe, it would have an effect on the market. The steps taken by SEBI would ensure, the traders don’t play risks on the budget day.

One of India's leading online retail broking houses, Sharekhan while discussing with The Economic Times have indicated they might raise the cash segment margin to 20-25% from this week until March 2 and return to usual limits later after the D day.

As per reports of the daily, if brokers hike the marginsthe traders who have bought large shares would be affected as they would have to spend more.

Bhavin Desai, analyst, equity derivatives of Motilal Oswal Securities believes, "Though there has been no unusual build-up in index futures so far, some stocks belonging to sectors such as real estate, nonbanking financial companies, mainly housing finance, capital goods and power, have seen short covering and long build-up".

"Those who have taken large position in these counters will have to keep ready more funds in case brokers increase the margin requirement,” he added.

A chief executive of a leading domestic brokerage house has said, "We will take a call on margins on Monday but I think part of the risk is mitigated as markets are now open on Budget day.”

In this context it may be recalled brokerages had increased client margins on the days preceding election results last year. Intra-day exposure limits had also been decreased to prevent any extremes.

(Image: Reuters)