BSE, NSE volumes show divergent trend

Anup Menon

OVERALL Trends: There was a distinct negative bias in the markets for a major part of the week.

On a week-on-week basis, the benchmark BSE Sensex lost around 0.9 per cent to close at 3905.8. The trends in the NSE mirrored that of the BSE.

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The S&P CNX Nifty ended the week at 1236, down by around 0.3 per cent as compared to the previous week. The futures market closely tracked the movements in the cash market. For instance, the Sensex November contract ended the week down by around 0.9 per cent at 3924.1 points. The contract with the same maturity on the Nifty lost around 0.3 per cent to close at 1239.9 points.

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Trading statistics: The trends in volumes continued to remain divergent between the two markets. During the week, volumes in the BSE declined while that on the NSE recorded an increase. The total volumes on the Sensex contracts declined by around 21 per cent to 1,749 contracts as compared to 2,224 contracts traded the week before. Volumes in short maturity contracts continued to dwindle. In contrast, at the NSE, total volumes increased by around 24 per cent to 2,637 contracts as compared to 2,130 contracts traded the week before.

Nifty November: The Nifty November is moving towards its maturity value. Total traded volumes were around 1,898 contracts as compared to 1,830 contracts traded in the week before. The valuation of the contract provides limited scope for arbitrage. The cost-of-carry on the contract based on the last day of trading works out to around 8.73 per cent. Fresh investments need not be considered at current levels.

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Nifty December: The Nifty December contract attracted considerable interest during the week. Total volumes jumped to around 628 contracts as compared to 250 contracts traded in the previous week. The open interest at the end of the week stood at around 160 contracts, up from around 93 contracts in the previous week.

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The valuation of the contract based on the last day of trading provides limited scope for arbitrage. The implied cost-of-carry on the contract works out to around 10 per cent. Fresh positions need not be considered at current levels.

Nifty January: Volumes in the Nifty January contract improved during the week. Traded volumes stood at 111 contracts as compared to 50 contracts the previous week. The valuation of the contract puts it in the no-arbitrage range. The implied cost-of-carry on the contract works out to around 7 per cent. Fresh investments need not be considered at present levels.

Sensex November: Trading in the Sensex November contract was subdued during the week. On a week-on-week basis, volumes declined from 2,080 contracts to around 1,621 contracts. The valuation of the contract based on the last day of trading provides virtually no scope for arbitrage. The implied cost-of-carry on the contract works out to around 13 per cent. Fresh positions need not be considered at current levels.

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Sensex December: Volumes in the Sensex December contract continued to fall during the week. Total volumes dipped to around 94 contracts as compared to 128 contracts in the previous week. The valuation of the contract provides some scope for arbitrage for an investor with a moderate risk profile. The implied cost-of-carry on the contract works out to around 4 per cent. Investors can consider taking a long position at current levels.

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Sensex January: The Sensex January contract saw some improvement in volumes with 34 contracts being traded as compared to 16 contracts in the previous week. However, lack of liquidity still poses substantial risk. Hence, fresh positions need not be initiated at current levels.