Following a lower roll-over (60%) of June Nifty derivative series, trading has been subdued in both the cash and derivatives segments of the equity market. On Monday, the cash segment volume dropped to R10,417 crore, its lowest since November 5. Earlier last week, the derivatives turnover had fallen to R58,677, its lowest since August 3. However, on Tuesday, the turnover in the cash and derivatives inched up at R11,218 crore and R67,131 crore respectively.
However, this is a 30% to 50% decline from their six-month average turnovers of R15,603 crore and R1.31 lakh crore respectively. ?With a lower long roll-overs, the traders were expecting the market to sustain its decline in the June series. However, as these expectations failed to materialise, there has been a decline in participation. This has resulted into a definite trend of declining volumes in both the derivatives and the cash segments,? added Savio Shetty, research analyst at the institutional derivatives desk of Prabhudas Lilladher.
Experts attribute the lackluster trading activity to a lack of participation with uncertainty as to where the market is headed in the near-future. Additionally, crucial decisions on fuel rate hikes as well as RBI policy review which is expected in the next two weeks is keeping investors at bay.
?The decline in overall volumes, including that of the cash segment indicates the uncertainty among traders regarding the near-term direction of the market. In such a range-bound market with lower implied and underlying volatility, the volatility traders are not making money. This has affected their participation which generally accounts for about 30% of overall volumes,? said Vijay Kanchan, head of institutional derivatives at JM Financial. According to him, the market is awaiting a trigger for breaching the near-term zone of 5,480-5,650.
According to Shetty, a decisive break of 5,400-5,600 range could indeed be required for this trading interest to come back to the market. ?Given, that June 5,400 strike holds the highest open interest on the put side, 5,400 has now become a very critical technical as well as psychological support for the market,? he added.