Derivatives Volumes Up At Over Rs 200 Crore Per Day

Derivative trading on the National Stock Exchange (NSE) has reported a phenomenal increase in volumes after the cash market turned volatile in the aftermath of the terrorist attacks in the United States.

The aggregate volumes in one-month, two-month and three-month contracts put together zoomed to over Rs 200 crore per day since September 12 from around an aggregated daily volume of Rs 70-80 crore before September 11.

Traders said that there is always a big shift by operators and speculators into derivatives when the cash market turns volatile. Buying into index futures is a logical way of hedging looking at the intra-day volatility in the cash market. A Bombay Stock Exchange broker said big corporates are also increasing their presence in the derivatives market.

The volumes in the NSE derivatives segment looked up on September 12, when the sensex registered intra-day volatility of 200 points. Sensing a profitable opportunity, traders picked up derivatives in the course of the day as the markets seldom close at the intra-day lows.

On September 12, the Sensex, after declining to 2954.35 closed at 3032.71, down 118 points over the previous close. The total volume of derivatives traded on that day zoomed to Rs 206.17 crore from Rs 70.86 crore on September 11, with September contracts attracting volumes of Rs 152.84 crore. And when the markets steadied on September 13, the derivatives volume declined to Rs 99 crore.

The following day, the sensex saw an intra-day volatility of 220 points, before settling 157.38 points lower at 2830.12.

The aggregate traded volumes shot up to Rs 262.60 crore, with September contracts hogging the limelight with trades of Rs 197.56 crore. The number of traded contracts crossed 10,000.

As the intra-day volatility increased considerably during the week ended September 21 on the fears of a war, the daily volumes in derivatives on NSE remained over Rs 200 crore. The one-month contracts were the preferred instrument as players obviously took a short-term view.

The volumes in derivatives segment have been on the rise ever since it was introduced. In May, the volumes aggregated at Rs 230.46 crore. In June, it soared to Rs 575.40 crore and further to Rs 1230.48 in July 2001. After remaining almost steady in August (Rs 1253.46 crore), in September so far, the volumes aggregated Rs 2107.77 crore.