The badla rates eased off during last week due to decline in equity prices as retail investors sold their holdings in the wake of continuous drop in share prices.
Selling pressure was the root cause for decline in badla investment. KSE badla volume during the week remained in the range of 450 million to 460 million shares.
Total badla investment at KSE declined by Rs 1.3 billion or 4.6 percent to Rs 26.1 billion on Friday, July 30, on weekend-to-weekend basis.
Badla investment at LSE declined by Rs 0.6 billion or 15 percent and reached Rs 3.3 billion on the last day of the week.
Combined badla investment on both exchanges was at Rs 29.4 billion - a decrease of 5.9 percent compared to previous Friday (July 23) closing of Rs 31.2 billion.
According to a report of Investcapital Securities, it was observed that outside market badla had entered the official badla market. Moreover, investors who leverage their position through stock futures are now coming to badla market due to low volumes in the futures market.
Weighted average badla rate at KSE decreased by 480 basis points over the week and stood at 8.2 percent on last Friday compared to weighted average badla rate of 13.0 percent on the previous Friday (July 23).
Weighted average badla rate at LSE also came down by 730 basis points on weekend to weekend basis and closed at 12.9 percent on Friday.
The decline in badla rates at both exchanges was caused by a combination of consistently declining equity prices, which flushed out weak holders, and potential badla financiers seeking attractive returns.
The average badla rates in leading scrips remained comfortably in single digit range. On Friday, average badla rates in PSO, OGDC, NBP, DG Khan, and Pakistan Oilfields was 8.1 percent, 7.0 percent, 5.9 percent, 6.9 percent and 8.3 percent, respectively.
Compared to this, overnight lending rates in money market were hovering around 4.5-7.0 percent on the last day of the week.