June futures at a discount

DERIVATIVES REPORT

Nifty futures continued to trade at a discount on the National Stock Exchange.

Nifty June 2004 futures on Thursday ended at 1,525.05, a 19.70 point discount to the spot Nifty closing of 1,544.75. Nifty futures added around three lakh shares in open interest.

The Nifty put-call ratio was unchanged, but continued to remain high. The implied volatility in call options was 30 per cent while the volatility in put options was 38 per cent. But volumes were extremely low at Rs 5,090 crore.

A dealer with an institutional brokerage house said, "High net worth individual and institutional investors are increasingly using Nifty futures for the purpose of hedging in a bid to protect their losses in the cash market. However, hedging by sale of Nifty futures results in additional cost for institutions/ traders in the form of margin payments."

Meanwhile, most individual stock futures are trading either at par or at a discount to the spot prices. The most active futures contracts were the Satyam, Tata Motors, Reliance Industries and SBI.

HDFC Bank added around 50 per cent in open interest, which is at a five-month high. The stock appears to be heading for higher levels. The open interest in Tata Power is at a three-month high.

The counter added six lakh shares or 12 per cent during the day. The stock has been steadily losing ground. However, there was hardly any change in open positions of most heavyweights. Meanwhile, FIIs were net buyers to the tune of Rs 75 crore on Wednesday in the derivatives segment.