The Hindu Business Line : Thirty-one new stocks in F&O segment sizzle

Chennai June 1 The next time when the National Stock Exchange plans to introduce a stock in the Futures and Options segment, try to add it to your portfolio. The possibility of making quick gains is very bright through this method.

NSE added 31 stocks from May 14 in the F&O segment. The average return produced by these 31 stocks during the period is 13.7 per cent against the S&P CNX Nifty's performance of 5.4 per cent. The return could be higher if one takes the closing price on Thursday, which was the settlement day for May contracts.

Ability to leverage makes these stocks attractive to traders. Another reason why traders flock to these counters is because of the arbitrage opportunities between cash and spot markets. Smart traders would take advantage of this differential, thus increasing the trading activity in the stocks.

Only three out of 31 new entrants — Rolta, United Phosphorus and Patel Engineering — turned in a negative return of 2 per cent, 1.8 per cent and 0.48 per cent respectively. The rest — ninety per cent of the 31 stocks — produced returns in excess of one per cent.

According to Mr Bharat Agarwalla of Ways Enterprises India Ltd, "in this kind of bullish market, even cat and dog stocks go up. So, any stock which is in the F&O would have a 99 per cent chance of going up."

No circuit filters

The trading community is drawn to the stock futures as the F&O stocks do not have circuit filters. That means a stock can go up or down without limit. This makes it possible for a trader to make relatively larger gains (or losses), in a single day.

The India Infoline stock benefited by its inclusion in the F&O segment last week when the stock jumped 45 per cent after it announced that the company has hired top men from CLSA, an international broking outfit.

Among the top performing stocks in this section were Bombay Rayon (30.5 per cent), India Infoline (47.8 per cent), Peninsula Land (32 per cent), Rajesh Exports (30 per cent) and Reliance Natural Resources (26.5 per cent).

A final word of caution added by Mr Bharat Agarwalla was that only people with high loss-taking capacity should trade in stocks such as these.

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