Open interest in derivatives at a record high

With just three days left for the expiry of December contracts on the National Stock Exchange's derivative segment, the gross open interest touched an all-time high of Rs 10,840 crore on December 19.

Much of the rise in open positions is attributed to the gain in the value of the underlying stocks. Last week, open interest in Nifty futures registered a 41.2 per cent increase.

"However, open interest appears to have a sell-heavy bias. This is also indicated by the persistent discounts in Nifty futures to the spot," IDBI Capital Markets said in its weekly report.

Open interest is the total number of open positions in the market in value terms.

Meanwhile, foreign institutional investor's share of the total open interest rose to 28.5 per cent (13,479 contracts out of the marketwide open interest of 47,263 contracts).

Surprisingly, FIIs have been on the buy side of the Nifty futures last week even as the marketwide positions are primarily on the sell side.

Interestingly, there has been a fall in the FII open interest in the stock futures segment as there may be a reversal of arbitrage positions (sell positions), with discounts creeping into many stock futures.

However, on account of a broad rise in the market, the value of the outstanding has remained more or less constant at Rs 3,380 crore though the percentage share of FIIs has receded from 17.37 per cent last week to 15.27 per cent on December 19, 2003.

The open interest in Nifty options, too, has touched a new all-time high in contract and value terms (33,035 contracts for Rs 1,180 crore).