A weighted aggregate of stock-wise rates, weighted by the of each stock.
Badla provided a clever loophole. If a trader lacked the capital to settle the trade but believed the stock price would continue to rise, they could the position to the next settlement period (usually 7 to 90 days) without taking physical delivery. index of badla
In 2005, SEBI banned the Badla system, citing concerns about market volatility and speculative activity. However, the Index of Badla continues to be calculated and published by various market sources, providing valuable insights into market sentiment and speculative activity. A weighted aggregate of stock-wise rates, weighted by
If an investor bought shares expecting the price to rise but lacked the capital to settle the trade at the end of the fortnightly cycle, they used Badla. Instead of liquidating the trade, the buyer's broker approached the Badla market during the settlement session. In 2005, SEBI banned the Badla system, citing
Due to a severe liquidity crunch and market demand, SEBI reintroduced the system in July 1995, but with stricter conditions, including a 90-day transaction limit.
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The system naturally adjusted to market sentiment. If buying pressure surged, Badla financing rates increased; if short selling dominated, rates dropped or turned negative ( Undha Badla ). 4. Systemic Risks and the Path to the Ban