2008 Karachi Stock Exchange Crisis

Crisis of Karachi Stock Exchange


April 20 : Karachi Stock Exchange achieved a major milestone when KSE-100 Index crossed the psychological level of 15,000 for the first time in its history and peaked 15,737.32 on 20 April, 2008. Moreover, the increase of 7.4 per cent in 2008 made it the best performer among major emerging markets.[2] [3]
May 23: Record high inflation in the month of May, 2008 resulted in the unexpected increase in the interest rates by State Bank of Pakistan which eventually resulted in sharp fall in Karachi Stock Exchange.[4] [5]
July 17 :Angry investors attacked the Karachi Stock Exchange in protest at plunging Pakistani share prices. [6] [7]
July 16 : KSE-100 Index dropped one-third from an all-time high hit in April, 2008 as rising pressure on shaky Pakistan's coalition government to tackle Taliban militants exacerbates concern about the country's economic woes. [8]
August 18: KSE 100 Index rose more than 4% after the announcement of the resignation of President Pervez Musharraf but Credit Suisse Group said that Pakistan's Post-Musharraf rally in Stock Exchange will be short-lived because of a rising fiscal deficit and runaway inflation. [9] [10]
August 28 :Karachi Stock Exchange set a floor for stock prices to halt a plunge that has wiped out $36.9 billion of market value since April. [11]
December 15: Trading resumes after the removal of floor on stock prices that was set on August 28 to halt sharp falls.

KARACHI STOCK EXCHANGE INFORMATION

Type
Stock Exchange
Location
Karachi, Pakistan
Owner
Karachi Stock Exchange Limited
Key people
Adnan Afridi, CEO
Currency
PKR
No. of listings
671
MarketCap
US$ 56 billion
Volume
US$ 12 billion
Indexes
KSE 100 IndexKSE-30 Index
Website
www.kse.com.pk

Domestic Arbitrage

Domestic Arbitrage exits between the difference in prices in the cash and futures markets. When you take positions in the cash market you have to either pay or give deliveries at the end of the day for any outstanding position. The position you take in the futures market can be carried forward till the expiry of the contract on the last Thursday of the month (see derivatives section for more information). The person who buys or sells shares in the futures market only pays a margin of between 20-40% (in normal times) of the total value of the position so is getting leverage on the position that he is taking.
Therefore in times of bullishness investors are willing to pay a slight premium to the underlying cash price in the futures market as they expect the stock to rise in the short term and are willing to pay the premium (discounts do also happen at times of dividend and bearishness in the stocks and thus no arbitrage would exist unless one previously held the underlying stock).
For example if Reliance is trading at Rs.500 in the cash market, at the beginning of the new futures contract it may be trading at Rs.505. The investor who buys at Rs.505 has the full month to hold the position and has the option to roll it over to the next month at any time before expiry.
The arbitrageur to take advantage of this buys Reliance in the cash market and simultaneously sells in the futures market locking in a profit of Rs.5 (before charges). Whether the price of the stock moves up or down he is secured with his return. In the normal course of events the gap decreases towards the end of the month and the arbitrageur will either reverse the position in both markets or rollover the futures position to the next month if the new gap is acceptable to him. The return is calculated on the amount of funds deployed for the fixed time period to expiry. If the gaps comes down before expiry the arbitrageur can exit the position and enter into a new stock where the gap is better.
Brokerages on the above are charged differently (lower than normal trading brokerages) due to the small spreads and are dependent on volumes. Minimum amount should be Rs.10 lacs due to the high value of futures contracts. Margins have to be paid in addition to the investment made in the cash market which must also be factored in when calculating returns.
This is a risk free investment which suits investors who have idle funds in bank fixed deposits as one should expect a taxable return of 12-18% per annum as per the recent past and market outlook. If returns dip the investor can take his funds back within 3 days. Investors must take advice from their accountants on the tax implications on this type of trading.
The above is a general overview of the process and for more detailed information please contact us.

Close Rates

We at JV CAPITAL SERVICES bring you simple yet utilitarian tools to enhance your trading experience. These are free to download and distribute. You may not sell them or charge any fee for usage from third parties. Since these are free utilities, we offer no support / tutorials pertaining to their usage. We also do not undertake to guarantee the accuracy and functionality of these products. The site visitors undertake to satisfy themselves of the same at their own end.

Daily quotation file of the NSE & Marketwide limits

These daily quotation files are downloaded from the NSE directly. Click on the links below to download the respective files.

Download the daily cash prices.

Download futures prices.

Cash Markets

If you have ever bought or sold shares through a Stock Broker, you will know that it can be very expensive, especially for smaller transaction. If you are looking for a cost effective, focused service, with the most competitive handling fees per transaction you should find that our Dealing Service is the best way to buy and sell your shares. Open an AccountJV Capital Services - a Member of the National Stock Exchange of India and a Dealer of the Over The Counter Exchange of India, as well as having a live Delhi and Bombay Stock Exchange terminals in our offices. It provides our clients with a first class service, whether you are an experienced investor, or trying to get to grips with the Stock Market for the first time.Our Share Dealing Telephone Service is available to answer your queries. Call it up for up to date facts and figures on all the markets before you make your investment decisions. One of our experienced executives will be pleased to give you an advisory service should you require it. We offer two types of Broking Services :-Execution-Only ServiceOur standard level of service where clients can telephone or Email their orders to us. The order will be confirmed by a trader. The clients can check back at any time to confirm whether the trade has been executed or not. A confirmation of the trades will be sent at the end of the trading session. Payments / deliveries etc. should be sent or picked up by clients. Contract notes will be sent by post.This service will attract our lowest level of brokerage.Advisory ServiceYou will be assigned two personal traders. One principal and one backup person, who will be responsible for all your orders and confirming trades executed. They will update you on any significant movements in the market and your shares. You will be given our recommendations for buying, selling and holding scrips, if you desire. More importantly you will be advised on whether the scrip is speculative or for delivery and when one should enter or exit the scrip. Confirmations will be faxed, emailed or given on the telephone. Deliveries , cheques and all other documents will be collected by us for local clients.This service is for those clients who prefer a more value added personal service.This service will attract a slightly higher brokerage than Execution Only.

List of Mutual Fund Companies in India

1. Reliance Mutual Funds
2. HDFC
3. Fidelity
4. Franklin Templeton
5. ABN Amro
6. AIG
7. Bank of Baroda
8. Birla Sun Life
9. Canara Bank
10. DBS Chola Mandalam AMC
11. DSP Merrill Lynch
12. Deutsche Bank
13. Escorts Mutual
14. HSBC
15. ICICI Prudential
16. ING
17. JM Financial
18. JP Morgan
19. Kotak Mahindra
20. LIC
21. Lotus India
22. Morgan Stanley
23. Principal
24. Quantum
25. State Bank of India (SBI)
26. Sahara Mutual Funds
27. Standard Chartered
28. Sundaram BNP Paribas
29. Tata
30. Taurus Mutual Funds
31. UTI
32. Benchmark Funds

What is an Indexed Mutual Fund and when should you buy it

Shubhojit Chatterjee asks “Can you please help us to know how to trade in Sensex as we are trading through ICICI Direct and they don’t have access to NSE”.
First lets review what an indexed mutual fund is. Indexed funds are an investment vehicle that aims to replicate movements of an index of a financial market such as NSE or BSE. For Indian investors that means a fund that will do as well or as poorly as the SENSEX or Nifty. These indexed funds will own all the securities of that index. So, for SENSEX index fund that means owning shares in all 30 companies that make up the index. Its usually a computer model that drives this fund not human stock picking. This also means lower management costs and fees because its mostly automated.
For the Indian market however the indices are fairly narrow so you dont actually get to capture the broad market, but a basket of stocks. (Editorial note: you would have done well though in the last 9 months!).
Here is a list of (maybe not complete) of Index funds that track the SENSEX:
1. HDFC funds
2. Franklin India BSE Sensex Fund & Nifty fund
3. Tata SENSEX fund
4. LIC MF Index Fund SENSEX & Nifty
5. UTI Master Index plan
Over the past few years funds that tracked Nifty have had a better risk / reward return (beta) than those that tracked SENSEX, since the Sensex is more volatile, and most funds that track the Sensex dont do as good a job as those that do Nifty.
Filed under: Uncategorized Tagged: SENSEX, Nifty, Indexed Fund, Mutual Fund, Index fund, Franklin India Fund, LIC funds, UTI Funds, Tata funds, HDFC Funds 7 Comments »