A majority of the stocks that the National Stock Exchange (NSE) has decided to remove from the futures and options (F&O) segment took a beating on Wednesday due to unwinding of positions by traders.
Out of the 51 excluded stocks, 44 ended with losses, with prominent names like Educomp Solutions declining 9.6 per cent, Lanco Infratech losing 8.5 per cent and Jet Airways dropping 5.6 per cent.
Market experts said these stocks, which will be expelled from the F&O list from the October series, dropped as traders offloaded their holdings. Selling pressure was witnessed both in the cash as well as the derivative segments.
| LOGGING OUT Stocks excluded from F&O list fell sharply as traders unwound their positions | ||
| Today’s close (Rs) | Change (%)* | |
| Educomp | 153.8 | -9.6 |
| Lanco Infr | 12.9 | -8.5 |
| Sterlite Tech | 31.3 | -6.7 |
| JSW Ispat | 10.2 | -6.4 |
| S.Kumars | 29.7 | -5.7 |
| SREI Infra | 20.4 | -5.6 |
| Jet Airways | 327.1 | -5.6 |
| Praj Industries | 52.9 | -5.1 |
| HCC | 17.5 | -4.9 |
| Orchid Chemicals | 119.0 | -4.8 |
| * Change over previous close Source: BS Research Bureau | ||
The 51 stocks, on an average, declined over three per cent on a day when the NSE benchmark index Nifty ended 0.36 per cent lower at 5,109.6.
B Gopkumar, head of broking at Kotak Securities, said, “The stocks fell due to panic and unwinding of positions. This was on expected lines. Typically, stocks take a beating when they are expelled from the F&O list.” T S Harihar, head (institutional derivatives), ICICI Securities, added, “Large number of institutional investors, who had built leveraged positions in these counters in their arbitrage book, exited their cash and derivatives positions.”
Typically, an arbitrage trader, based on price discrepancies in the cash and derivative segments, goes long in the cash segment and builds a short position in futures.
Harihar said such traders had to exit their holdings both in cash as well as derivatives to avoid formation of unhedged positions.
Among the 51 stocks, the ones with high trader participation cracked the most, said experts. On the contrary, stocks like MTNL, GlaxoSmithkline Pharma and Polaris, where traders didn’t have much positions in, closed with gains.
Siddharth Bhamre, head of derivatives at Angel Broking said the fall in the share prices was more due to 'sentimental pressure' and less due to unwinding of positions. “Selling pressure was more sentimental in nature. Traders took advantage of the situation and shorted some of the stocks,” he said.
According to Bhamre there was no reason for traders to unwind their position in a hurry as they have two more months and also the option of letting their positions expire.
In the largest exclusion ever, the NSE has culled 51 stocks from the derivatives segment following the tightening of eligibility criteria by the Securities and Exchange Board of India (Sebi). However, existing contracts for August and September series in these counters would continue to be available for trading and new strikes would be allowed to be created.
Under the new eligibility criteria for F&O stocks, Sebi has tripled the market-wide position limit requirement and doubled the median quarter sigma order size for stocks.
BSE F&O volume crosses Rs 1-lakh-cr mark
Equity derivative volume on the BSE crossed the Rs 1 lakh crore mark for the first time on Wednesday, in the history of the exchange. The combined derivative turnover on the BSE and the NSE was the second highest in the segment so far. The BSE volume stood at Rs 1,08,933 crore while the NSE’s turnover was over Rs 1,80,000 crore. The BSE managed a market share of 50.5 per cent in the index derivative space with the Sensex options turnover of Rs 1,07,391 crore. Nifty options worth Rs 1,07,160 crore were traded.
