KARACHI, March 8: The local carryover market is facing a problem of massive surplus liquidity after the badla rates fell to an all-time low to 5.7 per cent last week signalling that huge amounts may found their way into some other profitable investment avenues.

The other destabilizing factor appears to be an identical surplus liquidity-crisis on the open market in the backdrop of lower yields in the mid-week T-bill auction.

The shrinking carryover business reflects that those massively engaged in badla market are worried over the lower rates, which had dropped from the recent peak level of 50 per cent.

“Although there is no official word on the developing situation in the carryover market of the Karachi and Lahore stock exchanges, there is a loud whispering that officials have decided to fix badla rates for the leading 30 shares at 18 per cent and for others at 24 per cent from the current cap of 50 per cent,” market sources said.

They said badla rates in leading shares averaged around 4.5 per cent, which could well mean return of investment below 4 per cent after deducting allied costs.

“If the current phenomenon of lower rates prevail during the next few week also, I fear a massive outflow of liquid funds to other channels where the return on investment is lucrative,” says a leading analyst.

Although the KSE 100-share index recovered about 50 points or two per cent from the previous lows during the last week, leveraged positions of all the leading stocks notably PTCL, Hub-Power and PSO eroded sharply.