Sebi slaps fresh margins to curb volatility

With share prices rising sharply and Sensex crossing the 6,000 level, the Securities and Exchange Board of India (SEBI) on Friday sounded the alarm bell over the volatility in stock markets by directing five major exchanges to impose incremental additional capital and margins on their top 25 brokers in the form of cash or fixed deposits only for the next four weeks. The imposition of additional capital will be effective from Monday. The move follows the continuous rise in stock prices during the week with the BSE Sensex crossing the 6000 magical mark on Friday. “There was no risk of default by brokers and settlement risk,” said a SEBI official. Stock prices rose sharply during the week with the BSE Sensitive Index (Sensex) increasing by over 650 points. Sensex has risen by almost 1000 points since January, reflecting a hefty 20% growth. The spurt has been mainly led by information technology and media stocks. Sebi officials said stock exchanges have also been asked to keep a close watch on the volume of trading by big brokers. Major stock exchanges had hiked the margin on several stocks last month. "These margins have been temporarily imposed for a period of one month from Monday," he said. SEBI also advised investors to look at the fundamentals of companies before investing in these stocks. Infosys Technologies Limited , which led the bull rally in the last one week, announced that it was not aware of the reasons behind the recent trading activity in the company’s American Depository Shares (ADS). "There are no new corporate development outside of the company’s normal business activities that may impact trading," said N R Narayana Murthy, chairman and chief executive officer.