With the expiry of the February series contracts drawing closer, market players have started worrying about the liquidity situation in the March series, which, they feel, will be worse because of the near four-fold increase in the lot size of derivative contracts in stock futures. The National Stock Exchange (NSE) had recently increased the market lot of 243 stock future contracts.
Market players are of the view that the revision will entail a sharp rise in trading cost as more margin would be required to trade in the futures segment. This would, ultimately, affect the volume, they feel.
NSE had revised the lot size after their value fell below the prescribed minimum level of Rs 200,000 due to a sharp fall in stock prices this year. After the revision, some of the stocks with a considerable lot size would be Ispat Industries (24,800 shares per contract), Prism Cement (22,200), Nagarjuna Fertlizers (21,000), Dish T V (20,600), Alok Textiles (20,100), First Source (19,000), GVK Power (19,000) and Arvind Mills (17,200 shares).
The derivatives volume has already declined by 50 percent since January 2008 and the revision is likely to dent it further as traders will be forced to stay away because of the prohibitive operation costs.
“Even with their current lot size, hardly anyone is ready to buy. Once revised, liquidity in these contracts is definitely going to dry up. If this situation remains for a longer time, then the shares would be out of the F&O segment,” said a Mumbai-based broker.
After the revision, the lot size of top line Reliance Industries shares would go up to 300 from 75 at present. The lot size of other blue-chip companies such as ICICI Bank would go up from 175 to 700, Larsen & Toubro from 100 to 400, Bharti Airtel from 250 to 500 and Tata Consultancy Services from 250 to 500.