Foreign index futures' volumes on NSE remain tepid

This despite indices like S&P, Dow and FTSE hitting all-time highs

Leading foreign stock indices have hit record levels but the euphoria has not rubbed off on their index derivative contracts listed on the National Stock Exchange (NSE). Average daily volumes of index futures of Dow Jones Industrial Average, Standard & Poor’s 500 (S&P 500) and FTSE 100 index on the NSE cumulatively account for less than Rs 60 crore in turnover so far in March. This translates into 0.07 per cent of Nifty derivatives, which has a daily average turnover of Rs 81,716.50 crore.

Last week, these indices hit all-time highs. The Dow Jones Industrial Average, an index of 30 American blue-chips, hit an all-time high on 14,397.1 on Friday. The S&P 500 index, which tracks over 500 US companies, also hit an all-time high on Friday, closing at 1,551.18.The FTSE 100 index, a benchmark for large-cap companies based out of the United Kingdom and listed on the London Stock Exchange, closed at 6,483.58. This is its highest level since December 2007.

Siddharth Bhamre, head-derivatives at Angel Broking, noted that volumes have been miniscule despite recent outperformance against domestic indices.

“There is little open interest in these instruments although they are really good platforms to diversify country-risk. On a year-to-date basis they have given much better returns than the Nifty,” he said. The Nifty is currently trading at 5,945.7, or 192.9 points off its all-time high of 6,138.6 of December 2007.

But, even the trickle of turnover in March, has pushed their volumes into multi-month highs. Volumes for the FTSE 100 contracts are at Rs 8.91 crore, a five-month high, while for the Dow it was Rs 38.52 crore so far in March, a 12-month high. Volumes on the S&P 500 are marginally down at Rs 11.88 crore so far in March, after hitting an 11-month high of Rs 12.09 crore in February.

Contracts based on foreign indices began trading on the NSE in August 2011. The FTSE 100 began trading in May 2012.

Jitendra Panda, head of broking at Capital First, said there is a lack of investor awareness about the products, but is still hopeful of a pick-up.  

“It lacks liquidity… But these instruments should be looked at. Brokers should educate investors. Earlier, people hardly traded on Nifty index derivatives, this has now grown tremendously,” he said.