Mumbai: To ring-fence the capital markets from any possible systemic issues and manipulations, regulator Securities and Exchange Board of India (Sebi) and the stock exchanges have beefed up their surveillance and risk management systems to tackle expected volatility in markets due to trouncing of Bharatiya Janata Party-led alliance in the Bihar elections. The Bihar assembly election results on Sunday showed the Nitish Kumar-led Grand Alliance getting a huge majority after defeating the BJP-led National Democratic Alliance (NDA) in the politically important state.

The results are being seen as having an impact on the future course of economic reforms of the Narendra Modi-led NDA government at the centre. With market analysts anticipating a significant impact of the Bihar election results on stock markets, including a “knee-jerk reaction" on Monday morning, Sebi and the exchanges have put their risk management systems and surveillance measures on high alert to tackle the volatility and check any manipulative activity.

The manipulators typically tend to exploit such volatile situations in the stock market, which has led to the regulator and the exchanges being extra vigilant to tackle this scenario, a senior official said. “Sebi and the bourses and other market entities have prepared an elaborate vigil mechanism for tomorrow’s (Monday) trading while the pre-market orders that might have been placed today (Sunday) or earlier will face extra scrutiny," he added.

Market authorities have already been monitoring stock movements very closely for the last few days, which saw markets seeing significant volatility on the back of the exit polls and other predictions during and after the five-phase elections in Bihar. However, they are now mainly focusing on tackling any possible shock on Monday, the official added. When contacted, BSE’s chief executive officer Ashishkumar Chauhan told PTI, “BSE surveillance system and risk management systems as prescribed by Sebi are adequate to manage any price movement."

The counting of votes for the 243 seats in the Bihar assembly began early morning on Sunday. While initial trends showed the NDA in the lead, the Grand Alliance soon came on top and continued to consolidate its tally as the counting of votes progressed during the day. A buoyant Nitish Kumar and his foe-turned-ally Lalu Prasad also announced that the Grand Alliance’s victory in Bihar will have national implications and asserted that the results show that people also want a strong alternative at the national level.

While Prasad also announced a nation-wide stir against the Modi government, the analysts believe that the NDA’s loss in Bihar may have implications for the future course of economic reforms to be pursued by the centre. The foreign as well as large domestic investors were also keenly awaiting the Bihar results to decide on their future bets in the stock market.

“The market was building on this outcome over the week gone by, with the Nifty slipping below 8,000. We could see a knee-jerk reaction tomorrow (Monday) and then a phase of recovery and consolidation in the Diwali-shortened week," Centrum Broking chief executive officer K. Sandeep Nayak said. An elaborate vigilance structure was also put in the stock market in the run-up to the results of the Lok Sabha elections last year when Sebi and the stock exchanges were monitoring the moves almost on a 24/7 basis.

Besides, stock exchanges had put in place various circuit filters to stave off excessive volatility in stocks as well as derivatives segments. Brokerages and other market entities had also advised at that time to ensure there are no sudden spurts or falls in the market while investors are being discouraged from excessive margin exposure. Incidentally, Sebi recently asked bourses and clearing corporations to enhance trading, clearing, settlement and risk management systems to at least 1.5 times of the projected peak load as trade volumes soar at stock exchanges.

Sebi came out with these new guidelines after taking into account the recommendations of its technical advisory committee. Over the years, bourses and clearing corporations have experienced an increase in volumes as markets have grown. Under the existing policy, which has been in place since 2008, the per-half-hour capacity of the computers and the network should be at least 4-5 times of the anticipated peak load in any half an hour or of the actual peak load seen in any half an hour during the preceding six months.