Dec 7, 1998
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STOCK MARKETS Casino Capitalists The new entrants to the NSE's computerised trading ring are housewives and retirees who are making deals with their pocket money--and gambling spirit. By Sumit Mitra with Robin Abreu and Uday Mahurkar
The small and crowded office at Delhi's Green Park bursts with excitement before 3 p.m., half an hour before the closing hour. At one end of the oval table is the distraught chartered accountant, a Sikh, a regular client who has over a week picked up a few hundred State Bank of India (SBI) shares and a pile of Larsen and Toubro (L&T) at prices not reached again in a falling market. As the computer screen connected to the NSE flashes red bands on the two scrips, meaning there is selling pressure at these counters (for buying pressure, the colour is blue), the hapless speculator has his fingers racing on the buttons of his calculator or drumming the table. After 15 more minutes of agonising watch, in which the prices slide even further, he gives up. "Man, I am selling. Take 700 SBI and 500 L&T. " The words set the trading operator at work, matching the offered volumes with the best "buy" price on the screen. On the NSE, every "buy" or "sell" order is an instant commitment that must be honoured. With the sale of his week's pickings executed, the client strikes the posture of a tragic hero, cupping his head in his palms. His week's loss: around Rs 7,000. At the other end of the table, Colonel (retd) J.N. Gupta has a special way of making the best of a sagging market. On Wednesday he "sold" 500 shares of L&T at Rs 159.25 per share, the price at which there were buyers. The NSE permits such short sale in which you can offer a scrip for sale without really buying it. And now the 68-year-old ex-soldier wears a ear-to-ear grin because he's just bought the same 500 L&T scrips at Rs 150.75 per share and has squared off the deal. He is richer by Rs 4,000. Punters. Cheap-thrill addicts. Ill-informed speculators. Call them by any name but a new lot of middle-class risk-takers is increasingly thronging brokers' offices everyday. They are doing so much against the arguably sane advice of those who'd burnt their fingers during the Harshad Mehta days. Many of the new players do no have enough capital to take delivery of shares, so they must call quits before the settlement week is out. By suffering a small loss, if necessary. The introduction of screen-based trading by NSE four years ago has at last begun to attract ordinary folk who had in the past scrupulously stayed away from the ring -- with its loud outcry, the mystique of the hand signals and the inscrutable working of the trading system. In short, nobody trusted the market. In 1991-92, Mehta pulled off a pied-piper stunt when he led a gang of operators to temporarily drive up prices to stratospheric heights. The common investor was bamboozled into believing that the high would last forever. It didn't. And that made the stock market appear more devilish than ever. The culture of screen-based trading has taken the mystery -- and perhaps the sense of sinning -- out of the market. The "buy" and "sell" prices are on screen; you can dredge up price information from NSE's records if you wish. So there is no risk of the roguish broker quoting a high price to jack up his margin of brokerage. Moreover, the relative ease with which stocks are bought or sold on-line has reduced the brokerage charge to a negligible 0.2 per cent. It is a bit higher, varying from 1.5 to 2 per cent, if you want to take delivery. In the days of floor trading, no small-volume trade could be transacted without a good 2.5 per cent of the price sticking to the broker's fingers. However, what has indeed made the biggest difference is the new transparency of the market. Says R.H. Patil, managing director of NSE: "The investor here feels safe as every transaction is recorded." The screen tells you about not only the orders and offers but their volumes as well. If there is a very large order for a scrip, you are tempted to join in the buying spree in the hope that the demand will push up the price, and the margin is all yours. If you are savvy enough, you'll be cautious because it is quite likely that some clever operator is putting out a huge order (which nobody can meet) and is thus driving up the price for a quiet sale of the same scrip.
True that the new breed of neighbourhood speculators -- mostly retirees, self-employed persons and housewives -- make little impact on price movements. With stocks worth Rs 1,500 crore being traded on NSE daily, and many large operators dumping or picking up high-value stocks (Hindustan Lever, for example) in tens of thousands, the petty punter has no voice. But the 1,678 V-Sat dishes across the country, making trading possible on over 2,600 NSE terminals in metros and towns, have sharpened the common man's risk appetite. On terminals in the suburbs or small towns, they account for over three-quarters of the trades in numbers and about a quarter of the volumes. Participation is bringing the knowledge of the market close to middle-class homes. Anita Chowdhary, who teaches mathematics in a South Delhi school, drops by at Crescent to trade in a few hundred cheap shares, mostly of banks. "When the financial institutions enter the market, they first eye the bank shares," she says. At Dutta's office, A.S. Bajaj, a 65-year-old retired government employee, is the archetypal contrarian who says his role model is George Soros, the fabled currency speculator. Hawk-eyed, he surveys the room for a chorus of "buy" or "sell", for it's at that moment that he'll give the opposite order. In Ahmedabad, Jyotindra Patil, a small-time trader, limits his week's loss or gain to Rs 2,000. His motto: Liya, diya, bhool gaya (take, give and forget). To these neo-converts to the magic of the market, the bright screen with its mesmerising flow of numbers and colour bands is only a shade less chancy than a casino game. But they are learning the game and, more importantly, getting empowered. In a skill that was regarded as voodoo magic a few years ago. |
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If it's Tuesday afternoon at Jinesh Jain's
Crescent Securities office, then there is nothing to chew except fingernails. Jain is a
National Stock Exchange (NSE) broker -- one of the 1,033 trading members of the fully
electronic capital market. The exchange's trading week ends on Tuesday, the settlement
day, before which the client must decide whether he'd "square off" his purchase,
that is sell off what he'd bought in the week, or pay up and take delivery. 
The retail player is also learning the
fine art of "arbitraging", or earning the price margin of a share on two
exchanges. At offices of multiple-exchange brokers, the small client keeps his eyes peeled
on two terminals -- often of NSE and the Bombay Stock Exchange (BSE) -- never passing up
an arbitrage opportunity if there is a difference of a couple of rupees or so. Ravinder
Dutta, who runs one of these mushrooming investment boutiques at Noida on the outskirts of
Delhi, says that his clients switch between BSE and NSE like "trained jugglers".
In the sluggish market of today, small speculators play even on narrow weekly margins of
four or five rupees and, since their volumes are low, can even take delivery when their
cash permits. Says Clifton D'Souza of Mumbai's Moneyline Investment: "Today retail
players can put a few rupees down and judge for themselves when they want to sell. They
are the masters of their own game." 
