SLBS to the rescue in bear markets
With the markets plummeting sharply, long term investors have been feeling uneasy, watching the value of their portfolios collapse before their eyes.
The negative sentiment gripping them has left them inactively watching the markets in despair.
They have forgotten that adversity and opportunity are two sides of the same coin.
Securities Lending & borrowing Scheme (SLBS) presents one such opportunity that could be used to tide over the current market adversities.
Stock lending and borrowing is a scheme by which traders borrow shares that they do not already own, or lend stocks that they own but do not intend to sell immediately. Just like in the case of a loan, SLB transactions are executed at a market determined rate of interest. The stock exchanges have set monthly contracts and your investment tenure depends on these*.
Currently, a total of 331 stocks are eligible for SLB for the month of September 2019.
We’ve pulled up the returns on a few stocks in the SLBS segment between April 2018 and August 2019. These are the approximate average monthly lending/borrowing fees (premiums) that could have been earned by lending these stocks. We have chosen these as they have been relatively active during the 17-month period that we considered.
Source: NSE and Ventura Securities (*Price on 01/04/2019 & 30/08/2019)
It is clear that while these stocks were making notional losses, lending them in the SLBS segment could deliver real gains.
To know everything about SLBS – what it is, how it works, who can participate, how it is regulated, etc. – *read our article Make Risk-free Gains on Your Stocks Irrespective of Market Movements.
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We, Ventura Securities Ltd, (SEBI Registration Number INH000001634) its Analysts & Associates with regard to blog article hereby solemnly declare & disclose that:
We do not have any financial interest of any nature in the company. We do not individually or collectively hold 1% or more of the securities of the company. We do not have any other material conflict of interest in the company. We do not act as a market maker in securities of the company. We do not have any directorships or other material relationships with the company. We do not have any personal interests in the securities of the company. We do not have any past significant relationships with the company such as Investment Banking or other advisory assignments or intermediary relationships. We are not responsible for the risk associated with the investment/disinvestment decision made on the basis of this blog article.
Quite interesting and useful instrument to bring our cost down.