Financial Daily from THE HINDU group of publications
Friday, Oct 03, 2003
Financial Daily from THE HINDU group of publications Friday, Oct 03, 2003 |
|
|
|
|
|
Money & Banking
-
Govt Bonds G-Secs volumes sizzle in secondary market in H1 Suresh Krishnamurthy
Chennai, Oct 2 SECONDARY market trading volumes in Government securities have soared in the first six months of 2003-04 compared to the corresponding period of the previous year. According to data put out by Clearing Corporation of India, volumes have increased to Rs 12,77,972 crore in the period April to September 2003. This represents a rise of 124 per cent over the corresponding period of the previous year. Sources in the banking industry said with the interest rates steadily on the decline, the players have to roll around the papers more frequently to generate profits as before and that could explain to a large extent the surge in volumes. According to Mr S.A. Bhatt, General Manager - Treasury, Bank of India, trading volumes may even have to rise five times if banks are to make as much profit on the trading book as they did in 2002-03. Sources added that increased familiarity with Negotiated Dealing System for trading in Government securities, which was introduced in early 2002, also contributed to the large increase in trading volume. Profit-booking is suggested as another reason. According to Mr Bhatt, profit-booking on the held-to-maturity portfolio by public sector banks is also behind the spurt in volumes. Banks typically hold Government securities under three categories - held-to-maturity, held-for-trading and a residual category. The rise in trading volumes is, however, unlikely to lead to large increases in profit on the trading book, says Mr Bhatt. For securities, categorised as held-for-trading, to make profit, sizeable changes in interest rates are necessary. However, compared to 2002-03, interest rate decline has been smaller. For example, interest rate on the benchmark 10-year security declined from about 7.36 per cent as on March 31, 2002 to 6.20 per cent on March 31, 2003 - a decline of about 1.16 percentage points. This year, interest rate on the 10-year benchmark security have declined by less than a percentage point. . In 2002-03, Bank of India recorded profits of Rs 857 crore on the sale of Government securities. About Rs 150 crore of this profit was attributed to trading and the rest from sale of securities from the held-to-maturity portfolio. Other sources in the banking industry also confirmed the decline in profit from trading, but suggested that the extent of decline would vary from bank to bank depending on their trading strategies. Trading data also indicate that after peaking in August 2003 volumes have come down. According to Mr Bhatt, this is because banks are holding on to securities expecting a bank rate cut in the forthcoming credit policy. Other sources in the industry confirmed market expectations of a bank rate cut, but suggested that volumes spurted in August because of the repo rate cut in that month and the subsequent dip was normal. Sources in the industry also suggested that trading volumes in the second half of 2003-04 could be as high as what was recorded in the first half.
Article E-Mail :: Comment :: Syndication
|
Stories in this Section |
|
The Hindu Group: Home | About Us | Copyright | Archives | Contacts | Subscription Group Sites: The Hindu | Business Line | The Sportstar | Frontline | The Hindu eBooks | Home |
Copyright © 2003, The
Hindu Business Line. Republication or redissemination of the contents of
this screen are expressly prohibited without the written consent of
The Hindu Business Line
|