NSG nod to N-deal, lower crude oil prices revive dormant grey market.
Dabba trading, or the illegal share market, which offers carry-forward and leverage facilities to small operators, has became active after the 45-nation Nuclear Suppliers Group (NSG) approved a US-backed plan to lift a decades-old ban on nuclear trade with India on Saturday.
The Nifty futures, one of the widely-traded domestic equity futures index, were quoting a premium of 140 points in the grey market over the Friday’s closing of the index on the National Stock Exchange (NSE). The NSE Nifty closed at 4,352 on Friday. Over 200,000 contracts worth Rs 100 crore were traded by punters from Mumbai, Rajkot, Surat, Bhuj and Rajasthan and other north Indian states.
“Ganesh Chaturthi has brought special luck for traders as there is a sudden spurt in activity in this market and punters are blindly betting as they feel the Nifty may open in the positive zone following the NSG waiver,” said a stockbroker.
Grey market operators were in hibernation after the benchmark indices had crashed by 40 per cent since the start of 2008. Not many investors traded in the grey market after the debacle of the Reliance Power public issue.
Dabba trades are not executed on the stock exchange, but in the books of dabba operators, who are a cartel of stockbrokers. Punters take positions in this market as the settlement is done in cash and the margin requirement is not more than 10 per cent. Currently, operators running their books include prominent Mumbai-based market players and a few brokers from Gujarat.
Analysts from local brokerage houses too believe that stock markets could witness a further upside following the positive news on the nuclear deal.
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Stocks such as Larsen & Toubro and Bhel, among others, that stand to benefit once the nuclear deal goes through, may see a significant movement during the week ahead. “The markets will react positively to the NSG waiver. Capital goods and power stocks are likely to move upwards. In fact, even crude oil prices have stabilised and inflation is getting moderated. So there are not any negative cues that can pull the market down next week,” said Ambareesh Baliga, vice-president, private client group, Karvy Stock Broking.
Annual inflation based on the Wholesale Price Index (WPI) slipped to 12.34 per cent for the week ended August 23 from 12.40 per cent a week earlier.
Last week, Indian markets displayed a flat trend, with the benchmark index, the Bombay Stock Exchange (BSE) Sensex, rising 0.5 per cent or 80 points over four trading sessions.
“The only worry at this point is the foreign institutional investors (FIIs), who are pulling out, but even there the domestic institutional investors (DIIs) are absorbing the impact of that,” said Baliga.
During the last four trading sessions, FIIs have been net sellers in equity to the extent of Rs 1,570 crore, while DIIs bought equities worth Rs 1,208 crore.