Derivative volumes have fallen sharply at the stock exchanges. The average daily turnover (ADT) for the derivatives segment since the start of the June series so far, is the lowest for any series since August 2010. At R77,436 crore, the average turnover of the initial four trading sessions is 40% below its six-month average of R1.28 lakh crore. On wednesday, derivative trades totalled R76,944 crore at the National Stock exchange.
According to T S Harihar, derivatives co-head at ICICI Securities, lower May series roll-over along with a decline in volatility affected the trading opportunities for derivatives traders. ?While June series failed to start heavy, with a 60% roll-over, the declining volatility has caused a decline in the derivatives turnover. However he added that this temporary decline in volumes is in line with historic trends wherein peaking of volatility affects volumes with a 15-day lag.
Nifty May series experienced a roll-over of 60%; lowest roll-over numbers for any series in this calendar year. Additionally, volatility fell at the stock exchanges. India VIX, a volatility index by NSE, which represents the volatility in the derivatives market, declined to 16.73, its lowest since January 3.
This decline in volatility is believed to have accentuated with the start of the June series when trading sessions are relatively higher. Every derivative series ( including future and options) expires on the last Thursday of the respective month, generally giving a life-cycle of 4 weeks to any series. However, in case of the June series which has started trading on 27 May ( when the May series expired), the time to expiry stands at about five weeks (or 25 trading sessions). This gives the derivatives traders more time to work out their strategies, reducing the volatility. ?A higher number of trading sessions for any derivative series, weighs on the volatility in general and may affect the trading activity on the derivatives segment,? added an analyst.
Sensex gained about 3% on the back of a below-average roll-over of the Nifty May futures, which has surprised some investors. It seems they prefer to sit on the fence given mixed signals for the markets, said a derivative analyst.