Huge premiums for futures

Futures prices are trading at a huge premium over the underlying spot prices on the National Stock Exchange's(NSE) derivative segment. This indicates that the market is still bullish on these scrips gaining in the next few months.

The highest premiums are witnessed in the banking, cement and metals sectors. According to IDBI Capital, most market players are bidding up the stock futures since the movements in the underlying cash prices have been enough to the justify the 15per cent to 25 per cent premiums.

"Discounts in the market have virtually vanished," said an analyst tracking the derivatives market. This is because buying interest has emerged almost across the board.

According to data available from the NSE, stock futures in Bank of India, Syndicate Bank, National Aluminium Company, Mastek and Union Bank command the highest premiums over the spot prices.

Open interest in the stocks has also been building up despite the sharp rise in the cash prices.

It has been the highest in counters such as Tata Steel where it was just short of Rs 6 billion, Tata Motors, State Bank, and Reliance.

The scrips whose futures have gained the most in open interest are Digital, HDFC Bank, ITC, Gas Authority and ONGC. Betala Roopchand, director, Strategic Capital Ventures, says: "Oil and gas stocks have led the latest rally in the markets..." and "although there is a huge run up in prices this week, there is a large week-on-week gain of 40 per cent in open interest".

This points to the fact that there is a lot of steam left in the sector."

In fact, most oil and gas sector stocks recently shattered all volumes and open interest records.

However, market participants said that the euphoria should be viewed with some caution, since there are all signs of the market being overbought with stock and Nifty put call ratios at high levels.