Volumes in Nifty futures crash 50% on the first day of longer trading hours

Indian bourses extended trading hours by about an hour. However, the volumes in Nifty futures on the first day were one of the lowest ever in the past few years. Indeed, adjusted for one hour’s extra trade, volumes were 40% of what they should have been

Indian bourses have started business at 9.00am IST instead of 9.55am IST. It was also the first trading day of the year and the first day of the January series of derivatives. However, shockingly, market volumes crashed on the opening day.

During the day, total Nifty futures contracts traded were 2,37,231. This was one of the lowest-ever volumes of Nifty futures contracts traded, despite one hour of extra trading. The 40-day daily average of contracts traded over the five-and-a-half hour day is more than double that of today (5,18,184 contracts).

And what about the contracts traded in the first hour? The number of Nifty futures contracts today in the first trading hour were just 50,961 which is lower than what they were on 31 December 2009 (67,680). In fact, there is a reason why the first trading day of the new year of 2010 should have been much higher. A new series of derivatives started today. As a result, volumes in the first hour of trading were expected to go up massively. But the volume during the first hour of trading was poor—extremely poor—by that standard.

Markets have been trading on low volumes in late-December. As on 29 December 2009, the number of Nifty futures contracts traded in the first hour of the day were 44,426 while on 30 December 2009, the number of shares traded in the first hour of the day were 42,770. Since the global markets remained closed on Friday, 25 December 2009, for Christmas and on Monday, 28 December 2009, Indian markets were closed on account of Moharram, trading volumes remained low last week. Besides, most fund managers were on a year-end vacation. The market also remained closed on Friday, 1 January 2010 on account of the New Year holiday.

What kind of volumes should we have got on Monday? Here is an indication. The number of contracts traded in the first trading hour of Nifty futures of November 2009 contract (30 October 2009) were 131,134. This clearly shows that in the first hour of the new series of January, volumes should have been massive. However they were less than 50% of what they were in the November series.

And volumes never picked up later in the day.

So, the extended timing has hardly made any difference to the trading volumes in the early hours especially since all global markets were open after a long gap on 4th January. The reason behind the early opening was to attract back the trading volumes of Nifty futures traded in Singapore. However, the new timings have hardly made any impact on the volumes, despite the New Year and a new series of futures contracts.
 

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COMMENTS

J.S.Mammen

9 years ago

It may be too early to make this judgement.

Ramesh Bhat K

9 years ago

The regulator think they are ALWAYS RIGHT. They give it for voting for you to decide, but the decision of implementation will be on their pre-determined decision (Not the voting majority decision). Only the time to come will make them understand (We can not).

PRADIP SHAH

9 years ago

if authority like SEBI/NSE/'BSE wants to increase the time for SGX then they should understand who is oprate there. and 40 point different quote at sgx and one single trade of upper/lower quote of 1 shares will dicide enitre inidan stpck mkt. that is pitty of beurocacy . IT is prove that makority people have no voice . and you dont have any voice against power.

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Trading hours extended, what about settlement?

Indian bourses started trading an hour earlier from Monday. The real problem, however, is unavailability of a settlement system for brokers and banks before the stipulated time

Both the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE) on Monday started trading at 9am, about an hour earlier than previous days. This move is expected to increase trading volumes. However, a majority of brokers are still unhappy over this move.

Speaking about increased volumes in Monday's trade, a broker said that usually volumes peak at the beginning and closing of the trading session. Today, the treasury share sale by Reliance Industries led to an increase in volumes.

"Volumes were low when the Sensex was at 8,000 levels, then why was the move (to extend trading hours) not envisaged at that time?" asked the broker.

Stockbroker associations like the BSE Brokers Forum and the Association of National Exchange Members of India (ANMI) have asked bourses to maintain the status quo in trading hours until adequate infrastructure is in place.

ANMI, which claims the support of 850 members, had approached stock exchanges, regulators and the government to look into the extension of trading hours until adequate banking infrastructure was in place.

"The Association is of the view that it is necessary to maintain status quo on the timing, till adequate infrastructure is in place. There should not be any hurry to extend the market timing," ANMI's president EMC Palaniappan had said.

The Association has urged the Reserve Bank of India (RBI) to improve the banking infrastructure, as most of the banks across the country do not have real time gross settlement (RTGS) facility, which is necessary for high-value transactions, Mr Palaniappan had said.

Reflecting the intense rivalry between the BSE and the NSE, both exchanges, earlier this month, had said that trading would start at 9am from 4th January, nearly one hour before the current opening time, inviting protests from brokers and investors.

Typically, banks open their RTGS platform at 9am and bourses used to open for trading at 9.55am. Brokers were using the crucial time of 55 minutes to settle their margin payments. With the advancement of trading hours, this window is now closed for brokers and its effects would be known only after a few trading sessions.

"I don't think transactions with the banking system would be an issue. I believe retail investors, traders and arbitragers are not quite happy with markets opening early," said Prakash Kacholia, managing director, Emkay Global Financial Services Ltd.

According to a survey, nearly 80% of the trading members of the BSE Brokers Forum were against the extension of trading hours while 62% of the members of ANMI felt that extending trading hours could put additional load on the system.

Reacting on the issue, banker PV Maiya said, “Both exchanges are a bit childish. Why should they assume that the banking system or any other agency should bend to accommodate their whimsical game? Any change must involve due consultation with all the parties and not for display of one-upmanship, this is not their private affair."

In October, market regulator Securities and Exchange Board of India (SEBI) allowed bourses to set their trading hours between 9am and 5pm on condition that appropriate risk management systems and infrastructure are put in place.
 

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COMMENTS

PRADIP SHAH

9 years ago

if SEBI/NSE/BSE authority think that our volume goes to SGX then first they have to delist the SGX niffty from SGX. so many inidan co .script listed in US mkt. and other mkt. but they never change their time because our volume clinch by other exchanges.and still they want to open early then they should open mkt at 6.30 when SGX start...and every body knows it well that intrested person are trading in SGX. where normal quote is 10/40 point diffrent. and one sigle share trade will decide entire indian mkt. that every body knows..total volume/open intrest position of SGX niffty is maximum 100000 at the end of month that means 4000/5000 shares a day ..now gov. official have prove that they will not hear any majority voice because we have a power to spoil life of lakhs of investor and mkt related employee...that is call beurocacy...

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