Securities lending on India's NSE booms

Stock lending has been booming in the last three months due to reverse arbitrage opportunities thrown up by equities, reports DNA media.

Average monthly traded quantity in the securities lending programme, promoted by the National Stock Exchange (NSE) in Mumbai, has rocketed from some 2 million shares in the first half of the year to over 8 million in the last three months.

Experts interviewed by DNA media said this is due to increasingly large number of reverse arbitrage opportunities as domestic high networth clients take positions and several large-cap companies see wide spreads between cash and futures.

Shares such as those of the State Bank of India (SBI), Punjab National Bank, Mundra Port and LIC Housing Finance are among the large caps trading at a considerable premium in the cash market compared with their one-month forward prices.

Last month, the segment on the NSE witnessed a total of about 8.8 million shares traded through 1,671 transactions — a huge jump from the monthly average of 300 transactions seen for most of this year.

Going forward, experts see wider participation if an active physical settlement market in the derivatives segment is developed, notes DNA.