Uti Believes Natex Most Suitable For Derivatives Trading

And, even as the study has recommended a broad-based version of the existing BSE 100, the exchange has already announced a restructuring of the index.

The new BSE 100 has a market capitalisation of Rs 2,35,452 crore, which is about 50 per cent of the total market capitalisation.

This is against a 35 per cent market cap of the older version. The recast index, which has 15 new stocks, will be effective from October 14, 1996. The study had made a comparison between four indices - the NSE 50, BSE 30, the BSE Natex 100 and the Crisil 500.

It used five growth funds: Mastershare, UGS 2000, Mastergain 92, Indratna and Cangrowth. The paper has observed that the BSE National Index scores over other indices in terms of the hedging effectiveness, the most important criterion for selecting an index. It has, hence, been found the best for stock index futures. However, when only UTI schemes were considered, the NSE-50 has scored over others.

 

Given the nature of the Indian capital market and operators, the study says it is advisable to have a broad-based index for introducing futures trading. Narrow based indices could be distorted easily by manipulating one or two scrips.

It has recommended a review of the BSE National Index, and include the most desirable stocks. The revised index would then be best suited for introduction of stock index futures. The report observes that the cross-hedging possibilities are maximum with the NSE-50 index futures as its correlation with other indices is the maximum.