Badla rates rise by 650 basis points

Badla rates on the last session of last week increased by 650 basis points as several financiers were reluctant to park funds because of uncertainty over increase in badla limits and release of task force report.
The weighted average badla rate at KSE rose sharply to 17.9 percent on Friday (August 5), from a reasonable level of 11.4 percent on previous Friday (July 29). The badla rate increase showed the ease with which badla financiers were finally able to establish a stranglehold on 'first come first served' COT market. There were even situations on August 3 to 5 COT sessions where financing could not take place on the day in a few shares.
Badla investment level remained capped at Rs 12 billion at KSE. Released badla, i.e. badla transactions that actually take place on the day, amounted to a mere Rs 1.4 billion, out of Rs 12 billion total investment on Friday.
The weighted average badla rate at LSE, however, remained relatively subdued during last week, rising by only 90 basis points (from 10.9 percent to 11.8 percent) on weekend-to-weekend basis. Badla investment at LSE remained at Rs 0.9 billion on Friday.
The stock futures spread at KSE declined to 10.6 percent on Friday (August 5) as compared to 14.1 percent seen on previous Friday (July 29). The futures spread depicted a declining trend throughout the week.
Open interest in the stocks futures fell to Rs 8.3 billion, from Rs 11.2 billion of previous weekend. However, it was mainly due to settlement of the July futures contracts.
Looking only at the open interest figures for August futures contracts, an increase of Rs 1 billion, from Rs 7.3 billion to Rs 8.3 billion, is evident.