(Reuters) -Shares of Indian brokerages recovered after slipping earlier on Thursday, as analysts said the markets regulator’s tightening of rules for derivatives trading was not as harsh as feared.
The Securities and Exchange Board of India (SEBI) on Tuesday raised the entry barrier and made it more costly to trade in equity derivatives. The changes will be effective from Nov. 20.
SEBI had first proposed tightening derivatives trading in July.
Discount broker Angel One was up 6.5% to 2,767 rupees as of 11:15 a.m. IST after slipping as much as 5.8% earlier in the session. Analysts at Investec raised the price target on the stock to 3,000 rupees, the second-highest on the Street, citing an end to regulatory uncertainty.
Shares of exchange operator BSE were up 7.2% after falling nearly 3% earlier. BSE would take a smaller hit from the new rules than its larger unlisted peer National Stock Exchange of India, Motilal Oswal said in a note.
Discount broker 5Paisa Capital was down 0.5% after falling as much as 7%. Aditya Birla Money was down 2%, also off its earlier lows.
SEBI’s hike in margins for short options contracts was lower than expected and could help soften the impact from reduced participation, Jefferies said in a note.
The hike in the minimum contract size of two-to-three times was also lower than the expected three-to-four-fold hike, the brokerage said.
Indian authorities have been raising concerns about the unchecked explosion of retail investor trading in derivatives and the possibility that it could create future challenges for the markets, investor sentiment and household finances.
A SEBI study published last month showed that individual Indian traders made net losses totalling 1.81 trillion rupees ($21.56 billion) in futures and options in the three years to March 2024, with only 7.2% making a profit.
($1 = 83.9330 Indian rupees)
(Reporting by Nandan Mandayam in Bengaluru; Editing by Mrigank Dhaniwala)
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