The good times continue

Suparna / 25 Jan 2012

The RBI has brought cheer to the markets with its announcement of a CRR cut in its quarterly policy review. Overall, the domestic and international markets are responding well to the cues and remain largely positive, says Shailendra Lotlikar.
The RBI has finally made its intentions a little clear about the likely interest rate scenario that could pan out in 2012. At its meeting held on 24th January, 2012, it brought down the CRR by 50 bps, which means a boost to liquidity and in turn, to the markets. Having commenced the year on a strong footing,the reduction in the CRR came in as a booster shot for the market, which went up sharply to close yet another fortnight (11th January-24th January, 2012) on a positive note.

The broader market was up by five per cent over the fortnight. As has been the trend so far in the year, stocks across the board have been participating in the rally. Mid- and Small-Cap stocks performed in sync with their larger counterparts. The BSE Mid-Cap Index was up 5.20 per cent, while the BSE Small-Cap Index rose by 4.32 per cent over the fortnight.

Index 24-Jan 11-Jan % Change
Sensex 16995.77 16175.86 5.07
S&P CNX Nifty 5127.35 4860.95 5.48
BSE - 100 Index 8841.01 8352.08 5.85
BSE - 200 Index 2064.9 1954.91 5.63
BSE - 500 Index 6444.56 6110.26 5.47
NSE - CNX 100 4994.25 4721.6 5.77
NSE - CNX 500 4016.9 3805.5 5.56

Internationally too, the markets were more or less swinging to the positive side. Japan was the best performing market, the Nikkei having gone up by four per cent over the fortnight. The Dow ended up by almost two per cent, while the Shanghai Composite was up 1.46 per cent over the fortnight. The FTSE too managed to keep its head above the water, having gone up 0.67 per cent. 

Index 24-Jan 11-Jan % Change
Shanghai Composite 2319.12 2285.74 1.46
FTSE 5734.92 5696.7 0.67
Dow Jones Ind Avg 12708.82 12462.47 1.98
Nikkei 8785.33 8422.26 4.31

With some very favourable signs emanating on the governance and regulatory front, the market should continue to remain in the positive zone at least for now. The corporate results are something to watch out for in the fortnight to come.

BSE Continues To Improve LIEPS Programme

It is clear that the BSE is fully focussed on improving liquidity in its derivatives segment. Apart from making its LEIPS programme more attractive and inclusive, it recently modified the expiry cycle of Futures and Options contracts from a mid-month to an end-of-the-month
expiry cycle – a much favoured and demanded feature by the trading community in general. These changes have been effected from 13th January, 2012. During the phase out period, the existing mid-month March and April contracts will continue to trade, and at the same time, end-of-month contracts for the March and April contracts will also be introduced.

Incentives For Quoting:

In the recently-introduced LEIPS III (or Options contracts), a new class of Market Makers are introduced, who will be paid at a rate of Rs 2 lakh per day for providing two-way quotes in Sensex Options. This will help in creating a deep and tight order book in the Sensex Options contracts. 

Incentives For Trading:

As per the amendments, per-minute pay-outs for Futures trading to Market Makers and General Market Participants will be on a pro-rata basis for all the trades during that minute. As per LEIPS II and LEIPS III, Market Makers get a trading incentive of Rs 2300 per crore of Futures traded and General Market Participants get Rs 1100 per crore of Futures traded. The payouts have become higher in Options, where they range from Rs 200-400 per crore on Options-notional traded. This step will help in encouraging members to trade at all times without missing out on incentives, since all trades will be guaranteed some payout.

Incentives For Open Interest:

Payout for Open Interest (OI) Incentive has been changed from Rs 5000 per crore of average monthly OI paid on a monthly basis, to Rs
250 per crore of OI paid on a daily basis (at the end of the day). This will further increase the appeal of the OI incentives. All the newly introduced end-of-the- month as well as the existing mid-month contracts shall be eligible for the volume-based and OI incentives.

India’s premier stock exchange really seems to be gunning for the top slot in the trading arena through its various new initiatives. The continuous evolution of its initiatives will take it where it aspires to be.

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