The buyback offers of Carrier and Otis have come as a boon to the badla financiers, who, in the absence of takers, are using their money to encash these arbitrage opportunities.
The leading badla financiers who even in the recent past had over Rs 2,000 crore invested in the market, said, they were also diverting their funds into various fixed income instruments.
The craze for buyback offers is palpable as the stock of yet another multinational company saw a spurt in volume and price today on rumours of a forthcoming announcement. Market players said the badla operators were driving the stock.
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Most of the leading badla financiers said, following the ban on carry-forward products, they would park their money in fixed deposits and debt funds till the derivatives segment gains enough depth and liquidity. They have already begun withdrawing their money from the markets, as the badla volume is shrinking.
The fixed income instruments offer a return of about 10 per cent, which is significantly lower than the return from badla financing, which in buoyant markets was higher than even 20 per cent. In off-market deals, badla rates were as high as 100 per cent before the markets crashed and the bulls defaulted.
The badla financiers said, investments in fixed income instruments was an interim arrangement and they would eventually turn to the derivatives segment and utilise their funds in writing options for instance, but the risk involved in it was far greater than in screen-based badla.
"But before we take to the derivatives segment, the market has to grow, and the concerned issue is, this could take as long as six months," a Kolkata-based badla financier said. But despite the ban, off-market badla is likely to continue, market players said.
The badla financiers sustained huge losses in the recent past from their off-market financing deals, as the leading bull operators defaulted, and had it not been so, there would have already been surplus liquidity by now.
But since the payment crisis, Sebi has probed trading details of a number of badla financiers and their links with the various bull operators. In addition, the financiers having lost faith in the market players, have reduced their exposure to off-market deals.
Most capital market brains hold the existence of carry-forward products responsible for the crisis. They also alleged that off-market badla encouraged excessive speculation as it was not regulated, and was instrumental in an unreasonable spurt in stock prices.