Subdued debut by F&O entrants

No trading in two of the 39 new stocks; 18 saw trades below 50.

The new stocks selected by the National Stock Exchange (NSE) for trading in the futures and option (F&O) segment put up a poor show on the debut day. There was no trading on two of these stocks while 18 others saw trades below 50.

NSE recently added 39 stocks to its F&O kitty to increase volumes, but according to one of the top stock brokers, most of the F&O stocks selected do not have enough liquidity in the cash segment too though they are fundamentally sound.
 

LACKLUSTRE SHOW How the debutants fared on NSE's F&O
Stock	Open interest	Number of trades
Thermax	Nil	Nil
Concor	Nil	Nil
Srei Infra Finance	5,250	12
Orbit Corporation	5,250	14
HCL Infosystems	3,400	2
TV18 India	1,700	2
MRF	300	5
Asian Paints	400	3
Firstsource Solutions	38,000	20

Deven Choksey, managing director of K R Choksey Shares and Securities, said most of the stocks selected have a thin market capitalization and their floating stock in the market too is quite less. “Therefore even if the volumes grow in these counters going forward, the open interest in these stocks get exhausted very fast and not much traders take interest in such stocks,” he said.

For example, the Container Corporation of India and Thermax counters, which often see lacklustre volumes in the cash segment of the stock market, did not generate any volume. On the other hand, not more than 50 trades were conducted in stocks such as Asian Paints, Monnet Ispat, MRF, HCL Infosystems, UTV Software Communications, MindTree, Sintex Industries, Prism Cement and KLG Systel.

This is not the first time that traders are confused over the selection criteria for F&O stocks.

In December 2007, NSE had added 15 stocks such as Global Broadcast News, Hindustan Zinc, Jindal Saw and NIIT, but left out other stocks which had higher trading volumes.

Market players said adding illiquid shares to the F&O segment makes them highly vulnerable to price manipulation, where a group of operators can control the floating in the cash segment and cause sharp fluctuations.