December 1, 2003	Monday	Shawwal 6, 1424

Badla rates (carry over transactions) on major stock markets fluctuated in line with the rise and fall of the bourses during the last couple of months, but remained fairly stable within the manageable financial limits.

However, there were some trying times too, when some stock brokers crossed their exposure limits in a rising market and faced an imminent default because of their inability to meet the clearing obligations. However, the situations were saved by some corrective steps taken by the Karachi Stock Exchange high-ups.

After about 112 per cent or 1,428 points increase in the KSE 100-share index during 2002, and 33 per cent or 896 points rise in 2,003 at 4,604.00 during the post-budget buying euphoria — which is billed as an all-time high so far — badla rates moved in line with the stock prices.

In the last couple of weeks, badla rates at the Karachi Stock Exchange remained fairly stable and were mostly maintained within the single digit. The recent correction in the share market — which progressively dragged down the Karachi Stock Exchange 100-share index from its peak level of 4,604.04 to 3,700 points during the last about six weeks, badla business shrank and expanded depending on the performance of the stock markets.

Badla rates on the Lahore Stock Exchange remained a bit higher touching the peak of 15 per cent during the current week but the rise at the Karachi Stock Exchange was modest and on an average stood at 8.4 per cent.

In the last two weeks the KSE 100-share index has recovered 243 points after hitting its recent low at 3,732 points, but badla rates remained stable as investors made selective short-covering and did not go all-out for stocks of their choice at the recent low levels.

The advent of the holy month of Ramazan also has its toll in the form of falling traded volumes. Only last week it touched the two-year low of 64 million shares, which means lower investor demand of funds for badla financing.

In the sessions preceding Eid holidays, there were fears in some quarters that there may be pressure on money supply in the inter-bank market which in turn may affect the stock trading.

Massive amounts of cash did outflow for Eid shopping, financing of the cotton trade, and investment in the Oil and Gas Development Company issue. Nevertheless, the central bank took some corrective steps to ease-up the liquidity position. Fears of a possible liquidity-crunch, therefore, were allayed as the stock investors have plenty of bank money for trading purposes, and also at lower rates.

Leading stock analysts at the Invest Capital predict that badla rates during post-Eid trading sessions are expected to remain fairly stable as the central bank ‘s policy of keeping the money market pretty liquid will continue.

However, they fear with the implementation of badla only in 30 selected scrips from the next month, there could be lots of offloading in the secondliners as the investors will opt for main large-cap stocks.

The following table prepared by a leading stock research and brokerage house, the Invest Capital shows the total badla volumes and comparative rates on both the Karachi Stock Exchange and the Lahore Stock Exchange.