Saturday, March 15, 2008

What does SGX Nifty indicate?

For the past few days and weeks, an important indicator of how we open up trade has been the SGX Index and how things are shaping up there. Has that come backed up with volumes and does some of it have to do with the fallout after the P-Note episode?

Over the last two years, there was no SGX Nifty and the trading and volume that has come up is only in the last two years. Since the P-Note saga, the increase in volume as well as open interest has been significant.

Since September 2007 up to March 2008, the increase in the value of the domestic futures, the value of the index futures in the domestic market has been around 1.5 times. The FIIs trading in index futures, in September it was around Rs 18,500 crore, in October it was around Rs 18,000 crore, but in March it increased to around Rs 26,000 crore. So, there has been an increase of around 1.5 times.

SGX Nifty, in September the total open interest value, which was around Rs 1,500 crore in September 2007 increased to around Rs 4,000 crore in October 2007 and now in March 2008 stands at around Rs 7,800 crore. That means a significant five-tenths increase since September 2007. It also has been backed by a good increase in volumes, which has increased around 5 times. The number of shares that were traded on the SGX Nifty was around 1.8 lakh in September '07 compared with March '08, which is around 10 lakh shares.

The Singapore Exchange has been increasingly taking some action wherein they can decrease the lot size. If you just go back and understand one thing that earlier the SGX Nifty's lot size was around 10 and now they have decreased it to 2. That means the cost of buying one lot on the SGX Nifty was around USD 47,000, has reduced to around USD 9,400. That is based on today's price. So, they are taking steps to decrease the cost and there is a gradual shift happening on the Singapore exchange. That is why this is an important indicator that we have been tracking on a daily basis.

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