The Hindu Business Line : Sensex US futures may bring greater visibility

The proposed listing of dollar denominated Sensex futures on the US Futures Exchange (USFE) from February 2008 is a well-timed move by the Bombay Stock Exchange.

This move would lead to improved visibility for the Indian markets, which in turn, can lead to greater liquidity in the Sensex futures traded in domestic exchanges.

Nifty futures

The derivative segment on the BSE is in dire need of a leg-up as it is lagging the more popular National Stock Exchange (NSE) that enjoys the first-mover advantage.

The daily traded volume of the Nifty futures is between Rs 20,000 crore and Rs 30,000 crore, whereas the daily volumes in the Sensex futures is less than one tenth of this.

Beneficiaries

The greater beneficiaries of this move would, however, be the foreign investors who prefer to invest through the participatory note route.

The recent move by the Securities and Exchange Board of India (SEBI) to ban fresh issues of participatory notes with derivatives as underlying has barred the means through which these investors could hedge their holdings.

Many such investors had started hedging through the Nifty futures traded on the Singapore Stock Exchange.

However, since a greater number of external investors are headquartered in the US, the Sensex futures traded on USFE would provide them a direct means to hedge their positions in Indian stocks instead of adopting the more circuitous route through Singapore.

Economic growth

Hedging aside, US-based investors desiring to take exposure in Indian stocks in order to participate in the fast-moving Indian economic growth can now do so directly instead of adopting the ADR route.

Investing in dollar denominated security would also help to avert currency risk that investing in rupee denominated security would involve.

More Stories on : Stock Markets | Stock Exchanges | Derivatives Markets

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page