CNX 100 and Nifty Junior index futures, that are to be launched on June 1, have got some inside trouble. As many as 14 stocks that are part of these indices are not available for trade in the stock futures.
MUMBAI: CNX 100 and Nifty Junior index futures, that are to be launched on June 1, have got some inside trouble. As many as 14 stocks that are part of these indices are not available for trade in the stock futures.
The back door entry these stocks have gained into the F&O space may do little good to their own liquidity. But they might also potentially hamper the volumes of the new contracts themselves, feel industry watchers.
“Not all the stocks in these indices are represented in the F&O segment. This a cause for worry. There would have been opportunity for basket trading, which would have given fillip to the volumes. But, with the opportunity for basket trading curtailed, we should wait and watch how the volumes pick up,” said Karun Mudda of IL& FS Investmart.
Viral Doshi of Networth Stock Broking agrees that if these stocks were available in the F&O segment they will facilitate a big push in volumes for the new contracts. However, he adds that basket trading can still continue as traders can still utilise the arbitrage available between cash and futures.
Sebi had allowed 31 new stocks to be traded in the F&O segment with effect from May 14, taking the total number of stocks in the F&O segment to 186.
Technically, the CNX 100 is supposed to comprise the top 100 liquid stocks. IISL, a joint venture between NSE and CRISI, which computes and manages the NSE indices, follows the weighted market capitalisation method for this purpose.
However, Sebi has its own parameters to permit stocks into the F&O segment. Therefore, while the 14 stocks are yet to be permitted by Sebi for trading in stock futures, they have found a place in the Nifty Junior and CNX 100 indices.
The fourteen stocks are Apollo Tyres, Asian Paints, Aventis Pharma, Biocon, Cadila Healthcare, Container Corporation. IBP, ING Vysya Bank, Ingersoll-Rand, Nirma, Pfizer, Punjab Tractors, Raymond and Tech Mahindra.
The success of these new indices also depends on how well the options trade picks up, said analysts. “Unless options are active, it is difficult to see any substantial rise in volumes in the underlying. This was the problem with CNX IT and Bank Nifty indices and the success of the new indices will hinge on how well the options do,” said Mudda.
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