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April 5, 2001
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Money > Business Headlines > Report April 5, 2001 |
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Indian bourses second-most speculative after NasdaqBG Shirsat Indian bourses are second only to the Nasdaq in speculation, "beating" markets such as the New York Stock Exchange, the London Stock Exchange, and bourses in Hong Kong and Japan. The speculative nature of Nasdaq and the Indian bourses is indicated by the ratio of turnover to market capitalisation. The monthly turnover-market cap ratio of Nasdaq between January and December 2000aggregated 33.4 per cent, meaning over 1.5 per cent of the market cap changed hands. During the same period, the average turnover of the four major exchanges in India was 28.8 per cent of the total market cap, meaning that on Indian bourses, the daily turnover has been around 1.3 per cent of the market cap. This could be because yesterday's darlings in the Information, Communications and Entertainment sectors found equally ardent followers on the two exchanges. In contrast, the monthly turnover ratio on most of the developed and emerging markets ruled below 10 per cent of the market cap. It was around seven per cent on NYSE, 13 per cent on the London Stock Exchange and a modest 4.4 per cent in Hong Kong, Singapore and Tokyo. Among the emerging markets, Mexico's monthly turnover/market cap ratio rules at around 2.60 per cent, Australia's at 4.4 per cent, Malaysia's at 4.1 per cent and South Africa's at 2.7 per cent. The ICE boom that led the Nasdaq index to over 5200 and the BSE sensex to an intra-day high of 6150 in February 2000 fuelled speculation in these exchanges. During 2000, the speculative fervour saw the Nasdaq index gain more than 100 points as many as 62 times and 50-100 points 50 times. The Nasdaq also fell by more than 100 points 50 times, and was down by 50-100 points 48 times. Over the same period, the sensex saw upswings of 100 points or more 38 times. It declined by over 100 points 52 times. The sensex moved up by 50-100 points 49 times and fell by as many points 37 times. The speculative activity on the four major exchanges in India is cited in favor of rolling settlements. The growth in volumes, which was centered on the K-10 stocks, or stocks stated to be favoured by beleaguered bull operator Ketan Parekh, extinguishes arguments against rolling settlement in India. The fear of a liquidity crunch in the market is baseless as the top 10 stocks account for over 80 per cent of the turnover of the Indian bourses. The world over, stock exchanges have accepted rolling settlement. Most of the developed markets that have rolling settlement never faced a liquidity crunch of fundamentally strong stocks, despite these markets having a daily turnover of around 0.3 per cent of the total market cap. In fact, excess speculative activity by those who oppose rolling settlement has driven out investors from the Indian market. Powered by ALSO READ:
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