Divergent trend on NSE, BSE

Anup Menon

OVERALL Trends: The cash markets went through a bearish phase during the second week of trading in calendar year 2001.

On a week-on-week basis, the benchmark BSE Sensex lost around 3.5 per cent to close at 4036.60 points. The trends at the National Stock Exchange mirrored the trading at the BSE, with the S&P CNX Nifty closing the week down by around 3.1 per cent at 1286.8 points. The futures market tracked the cash market closely. For instance the near term January Sensex and Nifty contract ended the week down by around 3.5 per cent at 4037.8 and 1285.1 points respectively.

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Trading statistics: Trends in the overall liquidity levels have shown a divergent trend over the last week. While volumes in the Sensex contracts improved, volumes on the Nifty contracts ended the week down marginally over the previous week. Total traded volumes in the Sensex contracts improved by around 44 per cent to 3202 contracts as compared to 2222 contracts traded the week before. In contrast, total volumes in the Nifty contracts declined marginally by around 2.2 per cent to 4548 contracts as compared to 4652 contracts traded the week before.

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Nifty January: The Nifty January contract continued to remain the most actively traded in the Nifty family. Volumes in the contract improved marginally by around 1.2 per cent to 3536 contracts as compared to 3494 contracts traded the week before. The level of open interest in the contract was also high at 1651 contracts. The valuation of the contract provides some scope for arbitrage.

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The implied cost of carry-on-the-contract, based on the last day of trading, works out to a negative 3.7 per cent. Investors willing to take a risk can consider taking a long position in the contract.

Nifty February: Volumes in the Nifty February contract dropped during the week. Total traded volumes for the week was around 952 contracts, down by around 15 per cent as compared to the previous week. The valuation of the contract based on the last day of trading provides some scope for arbitrage. The implied cost of carry for the contract works out to around 4 per cent. Investors can consider taking a long position at current levels.

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Nifty March: Volumes in the Nifty March contract registered some improvement in the previous week. Total traded volumes stood at around 60 contracts as compared to 38 contracts traded the week before. The valuation of the contract based on the last day of trading provides some scope for arbitrage. The implied cost of carry, based on the last day of trading, works out to around 5 per cent. However, given the lack of liquidity, fresh long positions need not be initiated at current levels.

Sensex January: Volumes in the Sensex January contract improved considerably during the week. Total traded volumes was around 3184 contracts as compared to 2189 contracts traded the week before. The valuation of the contract provides some scope for arbitrage. The implied cost of carry-on- the-contract works out to around 0.84 per cent. Fresh long positions can be initiated at present levels.

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Sensex February: The Sensex February contract did not find many takers during the week. Total traded volumes dropped from around 33 contracts to around 18 contracts traded during the week. The implied cost of carry based on the last day of trading works out to around 0.26 per cent. However given the low level of liquidity, fresh investments need not be considered at present levels.

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Sensex March: The Sensex March which has the longest time to maturity found no takers during the course of the week. Given the long time to maturity, the contract is not likely to attract market interest for the time being.