Market cheers in the new year

The market seems to have started off the year 2012 on a good note. The first fortnight of the year saw the market close in the positive zone, with the broader indices ending up by almost three per cent. In fact, there has been a lot of buying interest in the Mid- and Small-Cap stocks, which can be seen from the way the BSE Mid- and Small-Cap indices have performed over the fortnight. The BSE Mid-Cap Index was up by seven per cent over the fortnight, while the Small-Cap Index ended up by a whopping 8.75 per cent over the fortnight.

All the sectors have fared fine, but the Metals, Consumer Goods and Realty companies have done exceptionally well. The BSE Metals Index was up by 10.45 per cent, while the CG Index was up by 9.50 per cent over the fortnight. The Realty Index also ended up by 9.41 per cent. Surprisingly, there was only one sector that ended in the negative – the BSE FMCG Index, which ended the fortnight with a 1.05 per cent decline.

Globally too, the markets have been in very good shape, at least for the first fortnight of the year. Except for Japan, there has been a positive sentiment emanating from all the other regions. China was the best performing market, with the Shanghai Composite up by 5.33 per cent over the fortnight. The FTSE followed closely and was up 3.44 per cent, while the Dow Jones Industrial Average ended up by 2.56 per cent. The Japanese Nikkei, the only one to end in the negative was down, though only marginally so.

However, the cues emanating from the news flows are not very encouraging. The fears of a slowdown are turning into a reality. Policy making and government initiatives have hit a low point. The Q3 results are what investors would be looking forward to now. Unless there are strong positive cues in the results, the continuation of good times in the markets would be highly suspect.

BSE Continues Forward March

One of the most important factors that enable success in any new initiative is the continuous monitoring and revising of the way any scheme is implemented. Keeping this in mind, the BSE recently announced certain amendments to the terms and conditions of its LEIPS-II Programme.

The Daily Volume Incentive Cap is the daily volume contribution by the LEIPS members on the LEIPS eligible securities. In other words, it is the daily limit up to which the trades would be incentivised by the exchange. Effective from 16th December, 2011, the Daily Volume Incentive Cap for Futures and Options (notional) turnover had been set as Rs 1800 crore and Rs 5100 crore respectively, distributed into three time periods. The exchange further increased the number of time periods from three to 375 of one minute interval each, from 27th December, 2011 onwards, to ensure continuous participation throughout the trading day.

Structural Developments In LEIPS-II:

The daily volume-based incentive is supplemented by minimum payout, which extends the payout in the non-incentivised volume up to a minimum guaranteed payout against the volume done by members. The OI-based incentive compensates the members for maintaining open interest towards the exchange on an average monthly basis. The first retail client payout is paid to the member when a new client trades for the first time on the exchange. There is no change in these respects.

Market Maker Obligations:

The Market Maker (MM) quoting obligation is amended for the Futures contracts, wherein the MM shall be required to adhere to the exchange published presence criteria of spread and ratio obligations, irrespective of cap breach (effective from 27th December, 2011).

Additionally, the MM quote obligations for Options contracts during the roll period shall now be applicable for ATM (At The Money) and OTM (Out Of The Money) strikes only, and will no longer be applicable for ITM (In The Money) strikes for the current month contracts. In ITM strikes for the current month contracts, the MM shall however be required to demonstrate presence instead of quote obligations. This amendment is effective from 7th January, 2012.

Other terms and conditions of the LEIPS-II scheme have not been changed. However, with a view to effectively evolve the LEIPS-II programme, the exchange shall continue to evaluate its overall performance and introduce further amendments in the near future.