Select Stock Futures Move Southward; Premia Slip

Mumbai, March 24 | Updated: Mar 25 2004, 05:30am hrs
The price movement of individual stock futures in the derivatives segment is indicating towards weakness to continue at least in a near future. After a healthy premium witnessed in the last few months, select stocks representing the futures market have started to quote at discount to its underlying stock price and a big chunk of stocks in this group are quoting either at par or with a minimal premium to the cash market price.

On Wednesday, the stock of Gujarat Ambuja Cement (GACM) closed at Rs 291.55 on the National Stock Exchange (NSE), while the April futures of GACM closed at Rs 281.25 and May futures at Rs 278.25, at a sharp discount to its underlying stock price. The HPCL stock on the NSE closed at Rs 479.40, while its April futures closed at Rs 477.35, the Reliance Energy April futures closed at Rs 725.80 as against its underlying stock price of Rs 735.75 on NSE.

Few days back, apart from the three stocks whose offers for sale just concluded, were quoting at a decent premium. These three stocks Oil and Natural Gas Corporation (ONGC), Gail (India) Ltd and Indian Petrochemicals Corporation (IPCL) were quoted at a discount last week on account of arbitrage between the primary market and the derivatives market. Market participants who had applied in these offers for sale, took a short position in the derivatives market on expectations that as and when the allotment of these shares takes place, the overhang of supply will depress the market and provide them an opportunity to square their transaction at cheaper price.

Dealers said, the market in the last few weeks have been tumbling down with thin volumes on year-end considerations and receding foreign fund flows in the secondary market. The recent trading data of Foreign Institutional Investors (FIIs) disseminated by the regulator through its website also includes FIIs investment in the recent offers for sale, dealers added.