After witnessing a lackluster 2008, action has caught up on the stock markets. Trading volumes have picked up significantly. The derivative market on the National Stock Exchange (NSE) has depicted higher growth as compared to cash since January 2009.
The average monthly derivative trading in terms of value, on the NSE has increased by 86.6% to Rs 72,618 crore in December 2009 from Rs 38,906 crore recorded in January 2009.
Not just the derivatives segment, volume growth is being seen in the cash market as well. Average cash market trading, in value terms, on the NSE has also increased by 45.9% to Rs 13,947 crore from the level of Rs 9,559 crore. But the growth in volumes in the derivates segment has been substantial. The derivative to cash market ratio increased from 4.04 in January 2009 to 5.20 in December 2009. Analysts at Prabhudas Lilladhar, a Mumbai-based stock broking firm, ?Delivery volumes have been steadily improving since May, indicating that much of the speculative activity has moved to the futures and options segment.?
Moreover, volumes in the cash market have been shrinking, especially since the huge surge noticed in May after the election period. According to Kishore P ostwal, CMD, CNI Research, ?Volume in cash market is shrinking because there are no defined rules and regulations of surveillance of B-group shares. For example, there are no norms for trade-to-trade transfer and back to normal group transfer which makes investors avoid B-group shares.?
In this light, Nifty options have also started attracting more attention. The average monthly value of Nifty options has increased steadily from Rs 15,463 crore in January 2009 to Rs 36,032 crore in December 2009. The share of Nifty option in the total NSE derivative has also increased from 39.74% to 49.6%. A derivative analyst from a leading broking firm reckons,?Investors lost lots of money in futures trading. So they have now started trading in options, where the risk is limited.?
On the other hand, the average monthly value of NSE future increased by 74.7% to Rs 18,855 crore from Rs 10,791 crore during the study period. But the share of NSE future in the total NSE derivative decreased from 27.74% in January 2009 to 25.9% in December 2009.