The move by the Securities and Exchange Board of India (Sebi) to introduce seven more products into the Indian market is expected to give the much-needed boost to the stagnating activities in the derivatives segment of the Indian capital market. The Sebi move is expected to perk up the turnover in the derivatives segment, which stagnated at an average of around Rs 50,000 crore a day under normal circumstances.
With all these products on the board, the Indian derivatives market can easily clock the daily average turnover of Rs 1,00,000 crore ($25 billion), said market observers.
The introduction of new products in the derivatives segment comes almost five years after futures and options segment was kicked-off in 2002 when newer products like index options, index futures, stock options and individual stock futures were introduced to replace age-old system of carry forward (badla system).
Sebi now wants to introduce mini contracts on equity indices, options with longer life and tenure, volatility index and F&O contracts on them, bond index and F&O contracts on them, exchange traded currency (foreign exchange) futures and options and exchange traded products to meet different investment strategies.
A source in the Prof Ram Mohan panel, whose interim recommendations were accepted by Sebi, said, to begin with, of the seven products that were approved by Sebi, mini contracts on equity indices are going to be instant hit on the lines of mini gold contracts currently offered by the Multi-Commodity Exchange (MCX). Other products will also be equally successful, eventually, as market needed some more time to understand and adjust with it.
Siddharth Bhamre, derivatives analyst and fund manager, Angel Broking said, ?However, options with longer tenure will be a big failure due lack of liquidity. At present, even next month and far months options contract are very illiquid.?
Other market participants who also welcomed the Sebi move said that there was a void in the Indian market with respect to new products particularly after four products that were introduced 2002 onwards. After that the market size has grown and investors are now familiar with the complex trading techniques in the derivatives segment.
