Drastic corrections of the recent past and ensuing volatility in the equity market have seen investors moving from the macro- to micro-investment, preferring to bet on individual stocks rather than the market movement.
On Thursday, while the index futures recorded a total turnover of Rs 19,736.22 crore, all 193 stocks available on the National Stock Exchange (NSE) derivative segment saw future trades, totalling a turnover of Rs 40,184.66 crore. In just one month, the volume of stock futures traded rose by 43.44 per cent from June 2007 to touch 6.47 lakh in July.
“This is because of the extreme volatility seen in the markets. Traders are confused and are avoiding any positions on the wider indices. They are preferring individual stocks as a safer bet,” says Vijay L Bhambwani of BSPLindia securities.
Brokers say traders have been getting into extremely volatile stocks in the recent past.
“There are more players in stock futures of highly volatile stocks. Apart from heavyweights, stocks like IFCI and IDBI have seen good interest from speculators,” says Madhukar Sheth, a BSE broker.
The growth in number of members in the NSE stock futures has also helped the segment clock higher turnovers. Since March 2007, NSE has included 63 new stocks to be traded in futures. Consequently, the share of individual stocks in the total traded turnover of the NSE futures and options segment has been on a steady climb since March 2007.
“The sentiment is cautious, but there are more stocks in the derivative pack that has seen individual stock futures’ turnover go up,” says Jitesh Ranawat, derivative analyst of Pranav Securities.
From around 40 per cent of the total turnover in the NSE derivative segment, the share of stock futures went up to 60 per cent as at the end of July 2007. In the same period, the share of index futures declined by 18 per cent.
While index futures allow the trader to notionally buy or sell equity indices various levels, stock futures allow them to take positions only on that specific scrip.