The turnover in the derivatives segment of the National Stock Exchange (NSE) has grown between April 2009 and March 2010 while turnover in the cash segment has fallen.
The average monthly turnover in derivatives (options and futures) has increased by 11% to Rs 74,673 crore, while the average cash turnover has decreased by 13% to Rs 13,630 crore. Indeed, much of the actions during this time, when the Nifty rallied from 3,060 to 5,304 , a rise of 73%,have been seen in the futures and options segments.
The ratio of the turnover in derivatives to cash has risen to 5.5 from 4.28 during the month of April last year.
The average number of transactions in derivatives has fallen to 100.53 crore while transactions in the cash segment have come off from 107.74 crore to 65.70 crore; the ratio increasing from 1.41 times in April 2009 to 1.53 times in March 2010.
Market watchers say this is not surprising because it is easier to transact in derivatives because investors do not need to pay the entire value of the contract and are required to pay only a certain specified margin.
On the other hand, taking delivery of shares would mean paying the entire value.
Indeed, market observers say that within the cash segment, fewer investors seem to be taking delivery of the shares that they buy and most of them are exiting their positions on the same day. Data from the stock exchanges shows that for the period between January and March 2010, deliveries as a percentage of total turnover was just 20.2% .
That is way below 28% seen for the quarter ended June 2009. Share purchases made in the cash segment are often hedged in the derivatives segment by both institutions and individuals. Also, it is not uncommon for large investors to take counter-positions in the futures markets, usually in the form of Nifty futures, while buying large chunks of shares in the cash market.