BSE, Angel One, Nuvama Wealth & MCX shares tumble; here is why

Shares of BSE Ltd, Angel One Ltd, Nuvama Wealth Management Ltd and Multi Commodity Exchange of India Ltd (MCX) recorded a sharp drop in Monday's early trade.

At last check, BSE's stock was trading 6.85 per cent lower at Rs 2,818, while Angel One fell 4.21 per cent to Rs 2,580. Nuvama Wealth and MCX were down 2.15 per cent and 2.74 per cent, respectively.

The decline follows the Reserve Bank of India's (RBI's) move to tighten guidelines governing lending by banks to capital market intermediaries (CMIs) such as brokers. The central bank has mandated that "all credit facilities to CMIs shall be provided on a fully secured basis." This implies that for a bank to provide a Rs 100 loan to a broker, the broker must furnish collateral of an equivalent amount.

Sharing his view on the fall, market expert Avinash Gorakshakar said, "I believe this is largely a knee-jerk reaction, as the move to collect margins from brokers is intended to make the capital markets safer for investors. Any step that strengthens the capital market over the longer term is certainly welcome."

In an interaction with Business Today, he stated, "In the short term, however, smaller brokers or brokerage firms could find it more challenging, and we may see consolidation in the broking space, particularly in the financing segment that caters to investors and traders. Larger players such as Nuvama or Angel One, and even other well-capitalised firms, could be better placed. If these stocks see a meaningful correction, it may present a good opportunity to consider them, as typically, the core business does not get materially impacted. Large clients generally understand and adapt to new regulatory measures."

Gorakshakar added, "So this dip could be used to accumulate such companies. That said, there may be some near-term negativity since the move was largely unexpected by the market. Over the next two to three days, a bounce-back cannot be ruled out."