UPA win revives dabba trading

A clear majority to the Congress led United Progressive Alliance (UPA) in the national elections, revived dabba trading or the illegal share market that offers carry-forward and leverage facilities to small operators.

Sources said, over 50,00,000 futures contract worth over Rs 200 crore of the widely tracked National Stock Exchange (NSE) Nifty index were traded in the grey market in Mumbai, Gujarat and Rajasthan on Saturday alone. The bets were likely to cross Rs 500 crore on Sunday, said sources.

Nifty was quoting at a premium of 300 points or 8.17 percent to its Friday's close of 3.671.65 on NSE. Going by this estimation, the 30-share Sensex on the Bombay Stock Exchange (BSE) could rise above 900 points when it opened on Monday. However, there were also Nifty sellers at 4,000 levels.

The bets were accepted within a couple of hours after television channels showed that UPA had managed to acquire over 250 seats at around 3 pm. Punters, who were not willing to wait for the markets to open on Monday, were betting in grey market. They were sure that markets would rise as UPA would not require support from Left parties. In the house of 543 seats a party requires a majority of 272 sets, which the UPA was close to.

Among individual stocks, punters were buying futures contract of Reliance Industries Ltd. (RIL) and TISCO. Volumes in these scrips could form around 10 to 15 percent of entire trades in Nifty.

Dabba trades are not executed on the stock exchange, but in the books of dabba operators, who are a cartel of stockbrokers. Punters take positions in this market as the settlement is done in cash and margin requirement is not more than 10 per cent.

Grey market was in a state of hibernation as benchmark indices had crashed by nearly 60 percent since last year. Also, not many many investors were willing to trade in the grey market after the debacle of Reliance Power public issue. The Reliance Power shares were listed at a much below price than expected by grey markets.

Talking about its outlook for benchmark equity indices on Monday stock brokers too were of the view that markets could register significant gains as without the Left parties, Congress is likely to aggressively push for economic reforms.

According to sources, the settlement of Saturday's grey market trades would be done through havala, after Monday's closing of benchmarks on stock exchanges.

via Gunaah