Bourses end on positive note

Anup Menon

OVERALL Trends: The markets ended the year on a positive note with some buying interest towards the end of the week.

On a week-on-week basis, the benchmark BSE Sensex gained close to 1.7 per cent to close at 3972.10 points. Trading at the National Stock Exchange, mirrored the trading at the S&P CNX Nifty closed the week up by around 1.7 per cent at 1263.60 points.

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The futures market tracked the cash market closely. For instance, the near term Sensex and Nifty contracts closed the week up by around 1.7 per cent respectively.

Trading statistics: Overall liquidity levels in the futures market were lower as compared to the previous week.

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Volumes dipped in both the Nifty and Sensex contracts. Total traded volumes in the Sensex contracts declined by around 49 per cent to 1248 contracts as compared to 2449 contracts traded in the previous week. Similarly total volumes in the Nifty contracts declined by around 19 per cent to 2049 contracts as compared to 2520 contracts traded the week before.

Nifty December: The Nifty December contract matured during the week. Total volumes dipped by around 45 per cent to 918 contracts as compared to the previous week. The contract closed on the settlement date 2.5 points short of its fair value.

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Nifty January: The Nifty January contract has moved into the one month trading range. Volumes in the contract increased by around 34 per cent to 1070 contracts as compared to the week before. The level of open interest was high at 1207 contracts.

The valuation of the contract based on the last day of trading provides some scope for arbitrage. The implied cost of carry on the contract works out to around 3.19 per cent. Given the long time to maturity for the contract, investors can consider taking a long position at current levels.

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Nifty February: The Nifty February contract moved into the two month trading range. Total volumes during the week climbed up marginally from around 53 contracts to around 61 contracts. Market interest in the contract is yet to be established which increased the liquidity risk for the investor.

The valuation of the contract provides some scope for arbitrage. The implied cost of carry on the contract works out to around 3.8 per cent. Investors with a higher risk profile can consider taking a long position in the contract.

Sensex December: The Sensex December contract matured during the week. Traded volumes dropped steeply from around 1895 contracts to around 728 contracts. The contract closed on the settlement with a negative spread of around 12 points.

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Sensex January: The Sensex January contract moves into the one month trading range from next week. Total volumes dropped marginally from around 547 contracts in the previous week to around 518 contracts. The valuation of the contract provides some scope for arbitrage.

The implied cost of carry on the contract based on the last day of trading works out to around 3.20 per cent. At these levels investors can consider taking a long position in the contract.

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Sensex February: The Sensex February contract should find more takers in the near future as the contract moves into the two-month trading range. Total traded volumes was a dismal two contracts as compared to seven contracts in the previous week.

The level of liquidity at present is very low. Hence fresh exposures need not be considered at present levels. However investors can watch its movement as trading interest is likely to pick up in the next few weeks.