Client category - counterparty to FIIs - very light on index futures
Big corporates and wealthy individuals, categorised as “client" by the NSE are trading very light on
index futures —
Nifty and
Bank Nifty — amid curbs by Sebi to rein in excessive volatility and a nationwide lockdown.
Clients most often take contrary positions to
FIIs. However, their outstanding net longs in index futures were only 2,720 contracts on March 27 (Friday). They were net short 3,765 contracts on January 13, just four trading sessions before the Nifty hit a record high of 12,430.50 on January 20.
The FIIs’ cumulative net shorts on index futures were 51,991 contracts on March 27. Proprietary brokers were net short by 2,262 contracts. Those cumulatively net long were DIIs, holding 51,533 contracts.
This means what index futures DIIs have net purchased were sold largely by FIIs and prop brokers.
Market constituents were varied in their opinion for the light positions.
Rajesh Palviya, Derivatives Head, Axis Securities, said the nationwide lockdown had impacted the market participation while Rohit Srivastava, Founder, IndiaCharts, attributed them to the Sebi's recent curbs on large players’ positions.
Whatever the reason, the impact is visible in shallow trading of index options also. Many a time traders long or short index futures partly or fully hedge themselves by taking offsetting positions on index options.
NSE provisional data for Nifty options expiring April 30 show the sell quantity of 8,700 strike at-the -money call options at a paltry 75 shares while the bid quantity is 750 shares or 10 contracts. Similarly, on the 8,700 strike at the money out of same expiry the bid quantity is 750 shares while the sell quantity is just 150 shares, or two contracts. The aforesaid are for the best bid and ask quotes.
The regulator has limited exposure to index futures at Rs 500 crore for longs who don’t have cash equivalent and for shorts who don’t have the underlying stocks.
Palviya expects the market to trade in an 8,200-9,200 range in the short term.
https://economictimes.indiatimes.co...ght-on-index-futures/articleshow/74874133.cms
