Currency and commodity futures surge, rupee appreciates

For the first time after last August’s launch, currency derivatives’ volumes have scored over volumes in equity derivatives. Not only that, currency futures’ volumes were at a record high, with over a million contracts traded on NSE and over eight lakh contracts traded on MCX-SX, too.

The volume on all three exchanges crossed Rs. 9,020 crore today. Over 1.9 million contracts were traded today on both main exchanges. Nearly a decade old, the equity derivatives market witnessed very thin volumes, as the market was open twice for a total of only 70 seconds and hardly any deals took place. The total volume was just five per cent of the normal volume, with only Rs.2,599.5 cr worth of futures and options traded on the NSE.

Out of this, over 70 per cent of the volumes were in index and stock futures, while the rest were in options. Thus letting currency derivatives scored over equity derivatives today. Volumes on the three commodity futures exchanges were a total of Rs.15,297 cr in the day session. In expectations of huge inflows in coming months, the rupee appreciated by 3.21 per cent today in the futures market. The US dollar closed at Rs.49.56 on Friday and had fallen to Rs.47.97 today at the close.

A treasury head with a large industrial house said the “dollar will find support at Rs.47.25/50 and in a couple of quarters, Rs.45 to a dollar is not ruled out.” A trader in the currency segment said whenever there is a sharp up or downward movement in currency, the “derivative segment sees huge volumes. Average volumes were Rs. 5,000 cr a couple of months ago, which is steadily rising, and moved to over Rs. 9,000 cr today”.

The currency derivative segment is expected to see more growth in volumes, as more and more banks have been participating and the fourth exchange, the United Stock Exchange of India, is launching currency futures from July.

Currency futures are exchange traded instruments and the market is hoping that with a stable government in place, more reforms will come, like bringing in options and allowing trading in more currencies. Today only dollar-rupee derivatives are allowed. There was also a proposal to allow foreign institutions to hedge in currency derivatives, but the country’s central bank has not favoured.