The broker credit unwinding is getting official with at least one Brokerage informing their clients officially that they will bring down the percentage offered against the paid portfolio value. The Brokerage firms earn an additional income by extending credit up to 70% of the paid portfolio of a client while charging very high interest when clients fail to pay for their purchases with no credit agreements. There are also some brokers who don’t charge interest on delayed payments but get the clients to settle or sell the unpaid purchases with the new DVP system that was adopted last year. Technically an investor who does not pay for his purchases whithin the trade day+ 3 mkt day window doesn’t own the shares he bought as it’s considered a technical default.The Brokerage settles the purchases not paid for by the client and has discretion to charge interest or sell the shares in question .
So overall considering the above situation the market will have low liquidity on the retail side till around end of March where the cycle will change once again exactly like what happened last year where the market pulled back from it’s peak in January and started picking up only after around May once the credit and a mix of other liquidity and valuations improved. The market lost around 106 points towards the end of trading on Tuesday on a slightly improved turnover of 3.2 billion . The indication of low turnover and market holding a 300 to 500 point band is a good indication that the market is lacking liquidity to breakout through the retail investors and the larger institutions and HNI investors are taking the opportunity to collect the discounted counters without upsetting prices. Majority of the quarterly results has been released by Tuesday and almost all companies have done very well with the exception of a few and the valuations are looking very attractive considering the momentum that will deliver even better results this quarter.
