Nifty futures discounted

DERIVATIVES REPORT

Volumes in the derivatives segment was up with the turnover at Rs 7,307 crore on the NSE's futures and options segments. A total of 3.25 lakh contracts were traded.

Index futures recorded a turnover of Rs 2,070 crore while the turnover in stock futures was of the order of Rs 4,156 crore.

The cumulative positions of foreign institutional investors as a percentage of total gross market position in the derivatives segment as on May 6, 2005 was 35.57 per cent. The total outstanding open interest in derivatives was in excess of 37 crore shares.

In the futures segment, the most active contracts were those of Tata Steel, Reliance, Satyam Computer, Infosys Technologies and State Bank of India among others.

The Nifty May series closed at 1986.15, at a discount to the spot Nifty closing of 2000.75 at the end of the day's trading.

The Nifty futures are still trading at a significant discount to the spot. Dealers said that this meant that investors are going long on some stocks while at the same time selling the Nifty in order to create a hedge against their exposure.

So it is not just a speculative behaviour on the part of these investors, but a genuine hedging strategy to protect their investments in the spot market. In fact, more than speculators, the hedgers have been fairly active in the market, given the volatility and uncertainty in the day-to-day movements of the market.