Week ends on stable note

Anup Menon

OVERALL trends: The volatile trends in the markets in the earlier part of the week's trading tapered off towards the end.

Traders go into a well-earned break, deriving some comfort from the fact that the impact of the rise in oil prices in recent times may not be as bad as market perception.

On a week-on-week basis, the BSE Sensex rose marginally by around 1.4 per cent. Similarly, the S&P CNX Nifty registered a marginal gain of around 0.4 per cent. The futures markets tend to mirror the cash market.

Click here for Table

For instance, the one-month contract on the Sensex gained close to 1.5 per cent during the week. The contract with the same maturity on the Nifty gained close to 0.8 per cent. The September maturities on both the NSE and BSE matured during the week. On a positive note, the three-month (December) contracts saw some active participation during the week.

Click here for Table

Trading statistics: During the week, volume continued on its upward path. The total volume on the Sensex contracts advanced to 1,338 contracts as compared to 1,306 in the week before.

On the Nifty, the improvement in volume was far more substantial with a 35 per cent rise over the week. On a week-to-week basis, total volumes on the Nifty futures improved from 1,168 contracts to 1,573.

Click here for Chart

Nifty September: The Nifty September contract matured during the week. Volumes dropped marginally from 835 contracts in the week before to around 777 contracts. A short position initiated at last week's closing price would have yielded profits if the investors had closed the position on Tuesday or waited till maturity. However, as indicated last week, the scope for arbitrage profits in the contract was limited during the week.

Click here for Table

Nifty October: The Nifty October contract has now moved into the one-month trading range. This has led to a significant jump in volumes. From 261 contracts traded last week, volumes increased to around 758 contracts during the week. Investors who sold the contract short could have booked profits during the week. However, with the contract moving into the one-month maturity frame, the valuation based on Friday's trading does not seem to provide scope for arbitrage. The implied cost of carry for the contract works out to around 11.38 per cent. Against this backdrop, investors can avoid taking an exposure in the contract.

Nifty November: The Nifty November contract has now moved into the two-month trading range. The valuation of the contract does not provide much scope for arbitrage. The implied cost of carry based on the last day's trading works out to around 6 per cent.

Sensex September: Volumes in the Sensex September contract dropped marginally during the week. The valuation of the contract during the week provided little scope for arbitrage. For most part of the week, the contract traded close to its fair value.

Click here for Chart

Sensex October: The Sensex October contract has moved into the one-month trading range. Volumes increased with around 494 contracts traded during the week as compared to 320 in the previous week. The valuation of the contract based on the last day of trading shows no scope for arbitrage profits. The implied cost of carry on the contract works out to around 10.31 per cent.

Click here for Table

Sensex November: Volumes in the Sensex November contract improved substantially with around 35 contracts being traded during the week as compared to 2 the week before. The implied cost of carry on the contract based on Friday's trading works out to around 4.73 per cent. Investors with a penchant for risk can consider taking a long position in the contract at current levels.