New Delhi: It is expected that the cost of trading in Indian stocks will go up on the Budget day and afterwards on account of brokerages likely to increase margin requirements that day.
On February 28 and March 2, the cost of trading session will be high.
Number of stock broking firms are likely to increase margin requirements-a percentage of the value of the securities that clients need to put up for loans to trade in the instruments as they gear up for heightened volatility on the two days.
While some broking houses are considering higher margins only for futures, many are planning to do it for the cash segment as well. On an average, margins are set to rise to 20-25% from 10-15%.
"We will be asking clients to provide additional margins, especially for the derivatives segment as we expect high volatility on Budget day," said CJ George, managing director, Geojit BNP ParibasBSE -0.19 % Financial Services. READ MORE
Most broking firms told ET that their risk management teams will meet this week to take a call on the margin requirements for the coming Saturday and Monday. Some are planning to double the current margin limit. The Securities and Exchange Board of India ( Sebi) surveillance team and the stock exchanges will be closely monitoring markets on Budget day, said a person aware of the plan.
The margin requirement differs for every broking firm and varies according to the client profile. The percentage may also differ according to the stock, based on the risk involved. This depends upon its liquidity and volatility along with general market conditions.
Some traders who have taken large positions ahead of the Budget may have to shell out more funds if brokers increase margin requirements, said analysts. Clients may have to allocate additional funds to continue with open positions.
Failure to bring in more margins would lead to squaring off of positions. Clients are usually allowed to take an exposure of 5-8 times the margin paid.
