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Focus on brokerage companies: Brokerage firms such as IIFL Securities, 5Paisa and Geojit Financial Services fell as much as 8%, on Thursday, October 3, 2024, following the Securities and Exchange Board of India (Sebi) announcement of a new six-step plan to tighten futures. and options (F&O) regulations.
Among individual stocks, 5Paisa fell 7.65 percent, followed by IIFL Securities (down 4.76 percent), Geojit Financial Services (down 3.32 percent) and Motilal Oswal Financial Services (down 3.32 percent) and Motilal Oswal Financial Services (down 3.32 percent). decrease of 3.15 percent).
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Angel One fell as much as 5.83 percent initially. However, the shares recovered and rose as much as 7.46 per cent to hit an intraday high of Rs 2,794.25 per share.
“Angel may see its profits temporarily affected as regulations are implemented and the company assesses the impact before taking corrective action. However, we believe that the company is in a transformation phase in which the share of financial product distribution (loans and fixed income securities), wealth management and AMC will start to contribute significantly over the next two years. We retain our ‘Buy’ rating on the stock,” Motilal Oswal said in a note.
Here’s what led to such a mixed reaction from brokerages:
The mixed reactions among brokerages stem from Sebi’s recent announcement, which detailed major changes aimed at curbing excessive speculation and addressing concerns over mounting losses among retail traders.
Key measures include increasing the minimum contract size from Rs 5 lakh to Rs 15 lakh, increasing margin requirements and requiring initial collection of option premiums from buyers.
Additionally, the new rules will limit weekly expirations to one benchmark per exchange, improve intraday monitoring of position limits, and eliminate the processing of calendar gaps on expiration days. LEARN MORE
A Sebi study said that over 93 per cent of retail traders suffered losses totaling Rs 1.8 trillion in the F&O segment in the last three financial years. This has sparked concern among financial regulators, including the Reserve Bank of India (RBI) and the top economic advisor, due to the average daily turnover in this speculative segment exceeding Rs 500 trillion.
In response to these concerns, Sebi released a consultation paper in July outlining the proposed changes, which were then reviewed by an expert working group and the Secondary Market Advisory Committee.
The new measures, designed to remove barriers to entry for retailers, will be implemented in stages, with three of the changes due to come into force on November 20.
First publication: October 3, 2024 | 11:53 a.m. STI