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| It should, in fact, have been implemented the instant PSUs started being listed. The first tranche of PSU selloffs was a token affair where tiny chunks of equity were disposed off at absurdly high prices. |
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| As a result, we have lived with an absurd anomaly in index calculations since the early 1990s. |
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| In stocks like Indian Oil, SAIL and SBI, the government held around 95 per cent of the equity, with only around 5 per cent being out on free float. |
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| This means that the difference in weights between the two methods of calculation was to the order of 20:1. |
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| The old method of assigning weights according to total market value made it extremely easy to manipulate index values by putting very little money on the table and concentrating on a PSU that had an unnaturally high index weight. |
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| A switch to weight by float cuts out those possibilities. It is still relatively easier to manipulate the price of a PSU with a low float. |
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| But such a stock no longer has a disproportionate weight in indices. The PSUs and other closely-held counters like Wipros will only regain their weighting pre-eminence if there are sellofs by majority shareholders. |
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| On the same lines, there are other technical changes that could help remove anomalies and smoothen trading. One such change seems long overdue. |
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| The minimum lot in the derivatives market is nominally a position of Rs 2 lakh in the given underlying. |
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| That is, in a stock priced at Rs 200, the minimum option position would be a position of 1000 options, covering Rs 2 lakh worth of the underlying. |
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| In practice, the minimum lot is often far more expensive than the Rs 2 lakh benchmark. The minimum lots were set at the time stock options were launched. |
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In most, if not all eligible stocks, prices have changed dramatically. In most option stocks, the prices have risen substantially
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