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Anup Menon

OVERALL Trends: The cash markets displayed higher levels of volatility with the rising uncertainty over the communal tensions in Gujarat. On a week on week basis, the BSE Sensex gained close to 2.1 per cent to close the week at 3678.8 points. The trend at the National Stock Exchange was also in line with that of the BSE. The S&P CNX Nifty closed the week up by around 1.2 per cent over the previous week.

The trend in the futures market was also in line with that of the cash market albeit at a lower level. For instance, the near month contract at the BSE closed the week up by around 1.1 per cent over the previous week. The contract with the same maturity on the Nifty closed the week down by around 0.3 per cent over the previous week.

Trading Statistics: Trading volumes continued to display divergent trends for the third week running. This week, while volumes at the NSE improved, trading interest at the BSE dropped. At the BSE, total volumes dropped by around 28 per cent to 20,080 contracts as compared to 27,760 contracts traded the week before. In the same time frame, the volumes at the National Stock Exchange were up by around 143 per cent to 42,228 contracts as compared to 17,382 contracts traded in the previous week.

Nifty February: The Nifty February contract matured during the week. Traded volumes improved by around 43 per cent to 26,544 contracts as compared to around 18,577 contracts traded in the previous week. As recommended in the previous year, investors with a long position in the contract could have closed out their position profitably during the course of the week.

Nifty March: The Nifty March contract now trades in the one-month horizon. Volumes improved substantially during the week, rising to around 15,277 contracts as compared to 3,100 contracts traded the week before. As recommended in the previous week, investors with a long position in the contract could have closed it profitably during the week. 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 35 per cent. Fresh long positions can be considered at current levels.

Nifty April: The Nifty April now moves into the medium maturity series. This should lead to some improvement in trading interest. However, it might still take a couple of weeks before it becomes very active. Trading interest during the week was relatively thin with just around 407 contracts being traded during the week. The valuation of the contract based on the last day of trading does provide some scope for trading profits. The implied cost of carry on the contract works out to a negative 18 per cent. Investors with a penchant for risk can consider taking fresh positions in the contract.

Sensex February: The Sensex February contract matured during the week. It was the most actively traded contract in the Sensex family. Volumes dropped by around 43 per cent to 14,880 contracts as compared to 26,010 contracts traded the week before.

Sensex March: The Sensex March contract now moves into the one month trading range. Trading activity in the contract improved from around 1,600 contracts to around 4,900 contracts. 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 10 per cent. Fresh long positions can be considered at current levels.

Sensex April: The Sensex April now moves into the two month trading range. This should reduce the liquidity risk associated with the contract to some extent. Trading interest during the week was relatively thin with just around 300 contracts being traded. The valuation of the contract based on the last day of trading does not provide much scope for trading profits. Hence fresh positions need not be considered at current levels.

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