Cos diverting funds to stocks -- NSE chief

Cos diverting funds to stocks -- NSE chief
AGENCIES

BANGALORE, FEB 17: The present volatility in the Indian stock market was due to the involvement of rich corporate houses in stock trading according to market feed back, NSE managing director Dr R H Patil said today.

Patil who delivered the keynote address at the "Service quality - a conclave" organised by the Confederation of Indian Industry later told newsmen here that several affluent corporate houses who were flush with money have diverted it to the stock market. Further, more brokers were also involved in speculative trading resulting in the phenomenal rise of the stock market index in the recent time.

Asked whether the market would continue its boom, he said it was very difficult to predict now. ``The self prediction and self satisfaction among the brokering community and the traditional investors was also the reason for the bull run of the stocks particularly the infotech scrips,'' he said.

Replying to a question, Patil said the diversion of fund from corporate to the market was not illegal, but concerned boards of the company should take a stand on such diversions. He said the incentives extended by the government in the last budget have also contributed to the boom.

He said the NSE wanted the Finance Ministry to clear some of the anomalies like stamp duty for debentures, suspension of time frame for the investor production fund and promotion of hedge fund during the current budget.

Earlier, delivering his keynote address, Patil said the NSE will be entering the internet trading. The simplification and adoptation of the modern technology had resulted in improving the investor confidence. Besides reducing the transaction cost, the efforts have paved the way for paperless trading. About 90 per cent of the settlement are now done without papers. In the past five years, the trading volume has shot up from a mere Rs one billion to Rs 130 billion to 140 billion in the country. The NSE and the Bombay Stock Exchange alone accounted for Rs 90 billion now.

The NSE has gradually brought down the transaction cost by 35 per cent and it was likely to go down further with the volume of trading increasing in the future.

NSE to treat Nifty as stock
BANGALORE: The National Stock Exchange has proposed trading of its Nifty index - by treating it as stock - once the government approval was received for derivative trading, NSE MD R H Patil said. ``instead of index, think of it (Nifty) as a shareholding,'' Patil explained to reporters here. ``If Nifty is 1720 today, think it as share price (Rs 1720) of one Nifty.'' ``You have to buy Nifty in the market. Contract can be of one month, two months or three months,'' he said. ``If the Nifty is, say 1800 on maturity of contract, you get the difference as profit.'' Patil said the NSE was waiting for the Government to issue a fresh notification to start equity derivatives trading, since ``the 1969 notification banned derivatives.''