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Anup Menon

OVERALL Trends: The equity market kick started the year 2002 on a positive note. On a week-on-week basis, the BSE Sensex closed at 3375.70 points, up by around 6 per cent over the previous week's close. The trend at the National Stock Exchange was in line with that of the BSE. In fact the S&P CNX Nifty also closed the week up by around 6 per cent over the previous week.

The trend in the futures market was in line with that of the cash market. For instance the near-month contract at the BSE closed the week up by around 5.9 per cent. The contract with the same maturity on the Nifty closed the week up by around 4.5 per cent.

Trading Statistics: Trading volumes remained stagnant during the week. At the National Stock Exchange, total traded volumes improved marginally to around 29,970 contracts, up by around 4 per cent over the previous week. In the same time frame volumes at the Bombay Stock Exchange remained unchanged with 5250 contracts being traded during the week.

Nifty January: The Nifty January contract is the near-maturity contract and the first Nifty contract that matures in the calendar year 2002. Volumes improved by around 54 per cent to 28,670 contracts as compared to 18,671 contracts traded the week before. The valuation of the contract, based on the last day of trading, provides some scope for trading profits. The implied cost of carry-on-the-contract works out to a negative 7.7 per cent. Fresh long positions can be considered at current levels.

Nifty February: The Nifty February contract is now trading in the two-month trading range. As expected, volumes in the contract declined during the course of the week. Total volumes declined from around 9,497 contracts traded in the previous week to around 1,162 contracts. As recommended in the previous week, investors with a long position could have closed it profitably. The valuation of the contract, based on the last day of trading, provides some scope for trading profits. The implied cost of carry-on-the-contract works out to a negative 1.97 per cent. Investors can consider taking

Fresh long positions at current levels.

Nifty March: The Nifty March contract is the longest maturity contract in the Nifty family. Volumes were relatively low with just around 136 contracts being traded. It is likely to remain this way for the next few weeks. Given the high level of liquidity risk in the contract fresh positions need not be considered at current levels.

Sensex January: The Sensex January contract is the near-month maturity in the Sensex family. Traded volumes improved during the week by around 6 per cent to 5,250 contracts as compared to 4,950 contracts traded the week before. The valuation of the contract, based on the last day of trading, does not provide much scope for trading profits. The implied cost of carry-on-the-contract works out to around 7.5 per cent. Fresh positions need not be considered at current levels.

Sensex February/March: The Sensex February contract now trades in the two-month trading range. There was hardly any trading in the contract during the week and this trend is likely to continue over the next few weeks. The valuation of the contract also does not provide much scope for trading profits. Similar trends prevailed in the long maturity March contract that was not traded during the week. In this backdrop, given the high level of liquidity risk associated with, both the contracts investors can refrain from taking fresh positions.

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