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SEBI’s relaxation on margin hike in non-F&O stocks to increase liquidity, help midcaps: Experts

Updated : November 26, 2020 06:28 PM IST

Experts believe the reduced margin will result in higher liquidity in these stocks and ultimately be help the midcap stocks.

Capital market regulator Securities & Exchange Board of India (SEBI) has withdrawn proposals that were introduced in March 2020, as the uncertainty related to pandemic looks to ebb. The move, experts believe, will lead to higher liquidity in these stocks and ultimately be helpful for the market.

In March 2020, the regulator had proposed to raise the margin requirement for the stocks outside the Futures & Options (F&O) segment to 40 percent in a phased manner. This was brought as the COVID-19 pandemic led volatility in the market was at its peak.

Sebi had said that if a stock moved more than 10 percent for three or more days in the last one month, the minimum margin rate was increased on it in a phased manner from 20 percent and higher.

However, “this shall stand withdrawn w.e.f. close of business on November 26, 2020,” SEBI said, in its circular on November 25.

Also Read: Explained: SEBI’s new margin system for non-F&O stocks

Speaking to CNBC-TV18, Nithin Kamath, founder and CEO of Zerodha and Sandeep Parekh, founder of Finsec Law Advisors said, “Around 800-850 stocks kind of qualified in that higher margin requirement where exchanges were charging 40 percent as margin so these 850 stocks potentially can get more liquidity because of this.”

Rahul Sharma, Market Strategist & Research Head, Equity99 Advisors is of the view that with the relaxation in SEBI norms in margin regulations, the action will start shifting to mid-cap stocks.

However, certain measures initiated by SEBI including the trading range of derivative stocks and index derivatives shall remain into force.

SEBI’s relaxation on margin hike in non-F&O stocks to increase liquidity, help midcaps: Experts

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