Sharp fall in volumes on NSE, BSE

Anup Menon

OVERALL Trends: The market moved in a positive territory for a major part of the previous week. On a week-on-week basis, the benchmark BSE Sensex gained close to 3.1 per cent to close at 4156.10 points.

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Trading at the National Stock Exchange, generally mirrored that of the BSE with the S&P CNX Nifty closing the week up by around 2.9 per cent at 1313.7 points as compared to the previous week. The futures markets tended to follow the footsteps of the spot market at a lower level. For instance, the Sensex one-month contract closed the week up by around 2.5 per cent at 4164.4 points. The contract with the same maturity on the Nifty went up by around 2.7 per cent to close at 1316.9 points.

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Trading statistics: The trends in volumes show a decline in overall market activity during the week. Traded volumes dropped sharply at both the BSE and NSE. The total volumes on the Sensex contracts declined by around 26 per cent to 1488 contracts as compared to 2003 contracts traded in the previous week. Moving in line with the BSE total volumes on the Nifty contracts dropped by around 31 per cent to 1889 contracts as compared to 2735 contracts traded the week before.

Nifty December: The Nifty December contract was the most actively traded contract in the Sensex family. Total volumes stood at 1544 contracts as compared to 1289 contracts traded the week before. The open interest in the contract to 1595 as compared to 702 contracts in the previous week. This indicates considerable interest in the contract. As indicated in the previous week investors who had taken a long position could have closed their position profitably at any point during the week.

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The valuation of the contract, based on the last day of trading in the previous week, provides some scope for arbitrage. The implied cost of carry-on-the-contract works out to around 4.44 per cent. Investors can consider taking a long position in the contract.

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Nifty January: The Nifty January contract failed to attract market interest during the week. Volumes declined drastically from around 1359 contracts traded in the week before to around 240 contracts. The lower interest in the contract could be on account of the long time to maturity for the contract.

The valuation of the contract based on the last day of trading provides some scope for arbitrage. The implied cost of carry-on-the-contract works out to around 3.81 per cent. Investors can consider taking a long position in the contract.

Nifty February: As expected, the Nifty February contract failed to attract market attention during the week. Total volumes during the week for the contract was around 105 contracts. The implied cost of carry on the contract works out to around 7.21 per cent. The contract falls in the no-arbitrage range. Fresh positions need not be considered at present levels.

Sensex December: Trading interest in the Sensex December contract, has been fairly active. Total volumes increased from around 1053 contracts to around 1388 contracts during the week. The valuation of the contract, based on the last day of trading, provides scope for arbitrage. The implied cost of carry-on-the-contract works out to around 3.65 per cent. Fresh long positions can be initiated at present levels.

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Sensex January: The Sensex January contract failed to attract market interest during the week. The total volumes recorded a marginal increase during the week to 100 contracts as compared to 41 contracts in the previous week. The valuation of the contract, based on the last day of trading, provides scope for arbitrage. The implied cost of carry on the contract works out to around 1.52 per cent. Long positions can be initiated at present levels.

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Sensex February: The Sensex February contract was not traded during the week. Given the lack of liquidity, fresh positions need not be initiated at present levels.