INSUBCONTINENT EXCLUSIVE:
MUMBAI: Market participants have urged regulators to take steps to curtail stock market activity, as India struggles to deal with the spread
of coronavirus pandemic.
“This is an unprecedented crisis
A financial crisis can be tackled by an array of tools available with policymakers
Here, it is essentially about existential threat, which is seeing bouts of irrationality,” said Ajay Bodke, CEO-PMS, Prabhudas
Lilladher.
According to Bodke, the market is displaying a collective frenzy leading to a disruption in price discovery and sharp differences
in bid-ask rates.
“I believe if schools and colleges are shut and all offices are asked to operate at only 50 per cent capacity, then
stock markets also need a break of at least two weeks
Globally, hundreds of millions of people’s pension money are getting roiled because of irrational fear
This cannot be an India-specific decision
The lead has to be taken by G7- mainly the US,” he added.
However, both BSE and NSE said there was no instructions from Sebi or the
government to shut trading and it’s unlikely in next two weeks.
The Philippine Stock Exchange closed indefinitely on Tuesday, while
currency and bond trading were suspended, the first shutdown of markets worldwide in response to the coronavirus, with authorities citing
risks to the safety of traders.
Regulators in France, Italy and Belgium banned short selling in some stocks for Tuesday’s session, aiming
to curtail the plunge in equity markets driven by the coronavirus outbreak.
France’s AMF halted such trades in 92 stocks, while Italy’s
Consob blocked the transactions in shares of 20 companies and Belgium’s FSMA imposed a similar restriction
Spain went further, telling market participants late Monday they couldn’t bet on share declines for a month, and French Finance Minister
Bruno Le Maire said he would like to see that rule extended Europe-wide, Bloomberg reported.
Not everyone, however, agrees that the market
should be shut down.
“Shutting down markets will erode the confidence of global investors, and it is not an option,” said independent
analyst Ambareesh Baliga.
“The maximum we can do is ban short selling, but even there, they are facing technical issues
They can increase margins from here, they can’t do really much,” he added.
Short selling is a practice in which an individual trader or
fund manager sells a stock, in the hope of buying it back at a lower price.
When market sentiment turned extremely bearish during the global
financial crisis in 2008, regulators resorted to a ban on short-selling.
Deven Choksey, Group Managing Director, K R Choksey Investment
Managers agreed with Baliga.
“Investors cannot be denied access to the market
Liquidity cannot be blocked in the market,” said Choksey.
“Derivatives are largely traded by people on the desk
They should shut down the derivatives market
We are inviting serious consequential damage beyond repair if we continue with the derivative market as we are today,” he added.
According
to the latest data from the Ministry of Health, India has 137 positive cases of which 24 are foreign nationals.
Maharashtra has a maximum of
36 cases as per its data, Kerala has 24, while Uttar Pradesh and Delhi have 14 and 8, respectively
States across the country have shut down all schools, colleges, gyms, night clubs and spas until March 31.
Indian Council of Medical
Research (ICMR) Director General Balram Bharghava said India was in stage 2 or local transmission of the virus.
