Economic Slowdown: Is It Just A Blip Or A Trend?

I found this morning, an extremely good article in Economic Times Edition by T.T. Ram Mohan. Is the Indian economy beginning to feel the effects of the meltdown in global financial markets? Industry grew in January 2008 by only 5.3% over the previous year, down considerably from 11.6% in January 2007. The Indian stock market has nosedived. Many commentators believe that turbulence in the financial markets is going to get worse, the US faces a serious recession and Indian economic growth will fall to as low as 7% this year. Further Post here.

Short Selling to Start April 21, SEBI orders

India’s capital markets regulator SEBI said retail and institutional investors will be able to begin short-selling stocks, lifting a six-year ban, on April 21.  Securities & Exchange Board of India had on Dec. 20 announced that it will put in place a stock lending and borrowing processes to facilitate short sales, the market regulator said in a release issued on its website in Mumbai yesterday.The stock exchanges and the depositories have been asked to make amendments to the relevant regulations for the implementation of the decision, the regulator said. The move was aimed at protecting the interests of common investors in securities and to promote the development of, and to regulate the securities market, SEBI said. Investors will initially be allowed to short sell shares trading in the derivatives market, the regulator had said on Dec. 20. The list of eligible stocks will be reviewed periodically, it said at the time. The regulator banned short selling in March 2001 to try and prevent traders from precipitating a drop in the benchmark Sensitive Index, or Sensex. The measure, which surged 47 percent in 2007, has slid 26% this year.

Short sellers, expecting a drop in a stock, sell shares they don’t own in the hope of being able to settle the trade after buying them back more cheaply in the future. SEBI also said that funds will need to start paying margins upfront along with other investors, modifying a Feb. 23, 2005 circular that had specified the risk management framework for the cash market.

`Level-Playing Field For All‘

“In order to provide a level-playing field to all the investors in the cash market as in the case of the derivatives market, the aforesaid circular is partially modified to provide that all institutional trades in the cash market would be subject to payment of margins as applicable to transactions of other investors” the regulator said.

The measure will take effect in two phases. To begin with, from April 21, 2008, all institutional trades in the cash market would be margined on a T+1 basis with margin being collected from the custodian upon confirmation of the trade,” the regulator said. “Subsequently, with effect from June 16, 2008, the collection of margins would move to an upfront basis.”

All Indian stock exchanges will put up the necessary guidelines and place the necessary systems to ensure the operationalization of the measure, the SEBI said.