Badla rates entered single digit zone during last week despite rise in share prices, proving that ample liquidity is available in the market.
During the week, badla rates continued their downward journey at KSE. This was quite uncharacteristic of badla rates, as with the rising market, increased demand of badla financing also impacts badla rates.
At KSE, weighted average badla rate had reached 8.6 percent on January 9 (Friday)--a decline of 4.6 percent as compared to badla rate of 13.2 percent on previous weekend.
The decline in the rate is an indication that lenders (especially financial institutions) are eager to place their funds as the year-end consideration is now over.
This also shows the magnitude of liquidity available in the interbank market where overnight rates are below 1 percent level.
At LSE, also, the weighted average badla rate reached 14.1 percent at the weekend, a decline of 7.6 percent as compared to 21.7 percent on previous weekend.
Total badla investment at KSE has reached Rs 17.8 billion on January 9. On previous weekend badla investment was Rs 18.2 billion. It is worth mentioning that on January 7, when KSE-100 index rose by 50 points, total badla investment reached Rs 19.2 billion. And, then when index surge stopped, total badla financing declined by Rs 1.4 billion in last two sessions of the week.
This reduction in badla financing, despite increase in equity prices, depicts some genuine buying or/and outside market financing.
At LSE, total badla financing reached Rs 2.4 billion at the weekend, compared to Rs 2.3 billion of previous week.
As year-end considerations are no more in the interbank market, and there are ample funds in the money market, analysts believe that rates in the badla market would continue to remain at existing levels. Leading blue chip stocks will continue to attract funds at KSE CoT at single digit levels.