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June 9, 2001
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Money > Business Headlines > Report June 9, 2001 |
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FI indifference, investor naivete mar futuresB G Shirsat & Sangita Shah Futures trading, which was launched exactly a year ago, has failed to generate investor interest in the market. The country's two major bourses-- the National Stock Exchange and the Bombay Stock Exchange - have managed to generate aggregate volume of Rs 45.84 billion between June 9, 2000 and June 8, 2001. The combined volume of Rs 45.84 billion is just 0.22 per cent of the total volume of Rs 2.16 trillion aggregated by the two exchanges. The NSE, which flagged off futures on June 12 last year, aggregated volume of Rs 29.77 billion, while the BSE, which began trading in futures since June 9, clocked Rs 16.07 billion. The spot market -- which has been now in bear phase after the information, communication and entertainment stocks' debacle --aggregated Rs 2.16 trillion volume during the same period. The BSE recorded a volume of Rs 0.95 trillion, while NSE aggregated Rs 1.20 trillion. Index futures trading faced teething problems due to back-office software hiccups and lack of understanding about the product. "The product failed to gain popularity mainly because the market already had the age-old carry forward mechanism with which the market players were comfortable with." Jigar Shah, head of research, KRC Securities said. Lack of institutional participation also had a role to play for the poor volume, dealers said. While there was hardly any speculative trading in index futures because of the existence of carryforward in stocks, hedgers (which are mainly institutional participants) were almost absent from the market due to variety of reasons. "After the ban on short sales, arbitraguers found it difficult to discover price difference. Volumes not only dipped in futures segment, the contracts started trading at a discount which further aggravated the liquidity," Manish Bang, derivatives dealer and analyst at SSKI Securities said. The lukewarm response to futures trade is also seen from the daily average volume. On the BSE, the daily average volume hovered around Rs 65 million, while the NSE had a daily volume of Rs 120 million. The volume in futures trade topped in February 2001 when the BSE and NSE aggregated volumes of Rs 2.80 billion and Rs 5.23 billion. March 2001 was the worst month for the BSE when volume aggregated Rs 939 million, while NSE's recorded a volume of Rs 919 million in August 2000. The futures trade on BSE reported a Sensex contract at a high of 5068 on July 25, 2000. The spot Sensex soared to a high of 5058.90 on July 13, 2000. The Sensex contract futures hit a low of 3130 on April 16, 2001, while on spot market the Sensex hit the low of 3120.13 on April 12, 2000. The market players are, however, optimistic for the future of derivatives in the country. "Ban on badla and other deferral products will force players to seize opportunities for speculation in whatever form it is available and futures and options will make up for that," Bang said. Shah has a word of caution: "There is no doubt that volumes will pick up, but it will be seen only after a year when the product finds acceptability among investors." Powered by YOU MAY ALSO WANT TO READ:
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