Bitten, speculators keep off bourses

Speculators still seem wary of entering the stock markets after the dramatic fall in May. Open interest in the derivatives market is down over 50 per cent from peak levels in May, and there has been hardly any revival despite some recovery in stock prices.

Open interest is the total number of derivative contracts that are not closed or delivered on a particular day. The total open interest position in the derivatives segment, which peaked at Rs 52,000 crore on May 17, is currently less than Rs 29,000 crore.

Similarly, open interest in futures contracts alone is currently less than Rs 20,000 crore "" down from a high of Rs 41,000 crore.

Outstanding open positions in futures hit a low of around Rs 18,200 crore in the second week of June, when the Sensex slipped below 9000 levels. Since then, there has been little recovery.

"Speculators are apprehensive about carrying forward positions even for a day, given the uncertainty in the markets," explained Hemant Thukral, senior derivatives analyst, Anand Rathi Securities.

Thus, the turnover in the derivatives market, which had also declined from the peak levels of Rs 44,000 crore to less than Rs 20,000 crore, has since recovered to over Rs 30,000 crore "" somewhat better than the pick-up in open interest.

Since stocks were heading just one way in the run-up to Sensex 12,000, traders continuously hiked their leveraged positions, only to burn their fingers in the precipitous fall that followed.

"Traders lost serious money in May. Gripped with uncertainties, the market still seems directionless, and hence traders are unwilling to take any serious positions," said Vijay Bhambwani, CEO of BSPL India.

Meanwhile, the roll-over of position in the derivatives segment has been worse than in the previous months.

The average roll-over in the previous months had been around 75 per cent, while this month the metric stood at around 67 per cent.