Sensex Bails Out Debt Dealers
A 2-1/2-year boom in India's stock market has made millions of investors rich, and now it is even helping dealers from the shrinking bond market stay in work.
The launch in August of screen-based trading in the 25-billion rupee-a-day ($567 million) federal debt market has killed off telephone dealing, once dominated by 30 brokerages.
As a result, broking house bond dealers have been rendered almost redundant.
But instead of sacking them, brokerages are retraining them to talk about earnings per share and price to earnings multiples to satisfy ever-increasing demand for equities.
"Most of us have equities business, so some redeployment and shifting is taking place from debt to equity," said Madhur Morarka, director at Mumbai-based Mata Securities Pvt. Ltd., one of the largest debt brokerages in India.
"Even if a person is not best suited for the equities job, we still say let us try him."
The Reserve Bank of India kicked off screen-based trading on Aug. 1 to improve transparency and curb volatility.
The move follows a trend around the world, with electronic bond trading taking off over the past seven years. A survey by the U.S. Bond Markets Association showed 77 electronic fixed income trading systems were operating in the United States and Europe in late 2003 versus 11 in 1997.
In India, large investors such as state-run banks have taken to it as it cuts transaction costs and brokers say their share of bond business has shrunk by 55-60 percent since the system began.
In contrast, equity trading has more than doubled to 80 billion rupees a day on the Bombay Stock Exchange and the National Stock Exchange -- both of which are screen-based.
India's stock market, the second-best performing major market in Asia this year, has rallied 32 percent since the start of January, backed by foreign inflows of $8.5 billion. Foreign fund investment in Indian bonds is capped at just $2.25 billion.
The surge in share trading has led to more demand for equity traders, research analysts and sales staff -- which the redundant bond traders are partly filling.
"We are starting to give our dealers the option of mutual fund distribution and corporate finance," said a senior manager at another leading brokerage.
The launch in August of screen-based trading in the 25-billion rupee-a-day ($567 million) federal debt market has killed off telephone dealing, once dominated by 30 brokerages.
As a result, broking house bond dealers have been rendered almost redundant.
But instead of sacking them, brokerages are retraining them to talk about earnings per share and price to earnings multiples to satisfy ever-increasing demand for equities.
"Most of us have equities business, so some redeployment and shifting is taking place from debt to equity," said Madhur Morarka, director at Mumbai-based Mata Securities Pvt. Ltd., one of the largest debt brokerages in India.
"Even if a person is not best suited for the equities job, we still say let us try him."
The Reserve Bank of India kicked off screen-based trading on Aug. 1 to improve transparency and curb volatility.
The move follows a trend around the world, with electronic bond trading taking off over the past seven years. A survey by the U.S. Bond Markets Association showed 77 electronic fixed income trading systems were operating in the United States and Europe in late 2003 versus 11 in 1997.
In India, large investors such as state-run banks have taken to it as it cuts transaction costs and brokers say their share of bond business has shrunk by 55-60 percent since the system began.
In contrast, equity trading has more than doubled to 80 billion rupees a day on the Bombay Stock Exchange and the National Stock Exchange -- both of which are screen-based.
India's stock market, the second-best performing major market in Asia this year, has rallied 32 percent since the start of January, backed by foreign inflows of $8.5 billion. Foreign fund investment in Indian bonds is capped at just $2.25 billion.
The surge in share trading has led to more demand for equity traders, research analysts and sales staff -- which the redundant bond traders are partly filling.
"We are starting to give our dealers the option of mutual fund distribution and corporate finance," said a senior manager at another leading brokerage.
posted by Sensex-Blog Admin at 5:38 AM
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