KARACHI, Aug 3: Average ‘badla’ (Carryover trade — COT) rates plunged to 7.3 per cent on Friday, which analysts said was the historic low return recorded by the equities market, in recent memory.

“Karachi’s once lucrative badla market has lost steam as far as returns are concerned”, said Mohammad Sohail, head of research at InvestCap. A single digit return from badla investment is an unusual phenomenon, which analysts attributed to “too much hot money chasing too few borrowers”. In a low interest rate scenario, the badla returns have also settled down to single digits since April, in line with yields offered by many other fixed income investments, analysts said.

On Friday, Aug 2, when the weighted average badla rates hit their lowest at 7.3 per cent, the badla investment stood at around Rs3 billion, with badla lenders desperate to provide funds, even at such minimal returns. Curiously, badla lenders provided financing for two top scrips at rates even lower than 7 per cent: Hubco at 6.9 per cent and PTCL at as low as 6 per cent.

On Thursday and Friday, KSE’s overnight badla rates were noted to be lower than the local inter-bank money market rates, where overnight lending and borrowing took place at around 8 per cent.

Analysts explained that the abnormal trend was occurring because investors in the badla market preferred to invest at low levels to save CDC charges. “This situation of higher rates in the inter-bank overnight market cannot stay put for long because arbitrageurs will begin making money out of it”, says Sohail of InvestCap.

The badla market actually went on to mirror the listless and lethargic mood of the ready market, which saw volumes dip to 16.9 million shares on Friday — fourth lowest since May 1998.

The low turnover resulted in some reduction in weak holdings, analysts said, but added that the low badla volume of 130.5 million shares was without taking into account the outside market badla and share financing numbers, which were difficult to ascertain.

A worried stock broker pointed out that for more than 10 trading sessions, KSE-100 index had been moving in the 1,780-1,800 zone with volumes so small as to threaten even the livelihood of stock brokers.

Giving the outlook for the coming week, stock brokerage house, KASB stated that there seemed no trigger in the intermediate term that could lead the market to break out of its lethargy.

“Even though this is the season for financial result announcements, investors are more concerned with the political scenario”, wrote KASB in its week-end report, adding that though the blue chips such as PTCL and Hubco offered attractive yields, the week to follow was unlikely to bring much excitement to the market.