Thursday, January 13, 2011

Trading in Global Indices

Yes, we can.

Quote
Market regulator SEBI Tuesday paved the way for Indian investors to trade in large indices of 24 global exchanges, including that of US, Europe and Asia.

As per a SEBI circular, Indian exchanges will be able to provide trading in derivatives contracts of these global indices.
UnQuote

Thanks to Gaurav for pointing out this important piece of news for traders. It should be just a matter of time before the NSE introduces Index contracts on all the 24 global indices. So, the opportunity will come to trade in many different markets. There will be two practical issues:
1. Liquidity. Notice how the CNXIT contract remains illiquid. The foreign based indices may remain even more illiquid.
2. Trading Time. Will we trade when the original market is trading? This means trading on the Nikkei should start early morning, and, so on. If we do not trade in the same period, then our market will be confronted with repeated gaps and remain listless throughout the day. Notice how Silver/Gold contracts remain dull till 6 PM when trading starts in the USA.

With all of these issues, there is no doubt that interesting times are ahead.

15 comments:

men said...

Could you please give the points to be noticed for a distribution pattern.
Also on the charts RIL has been forming lower highs and higher lows since june 2009, kindly confirm with your views.
Regards,

jitender said...

Hello Sudarshan JI
While most other analyst are busy telling that the markets after falling so much will now move upwards.
Today when Devina asked you about your closing strategy you told markets would remain choppy and market itself would tell about its next move. This why you are the most sensible technical analyst in India as you try not to over smart the markets and predict its each and every move.Listening to you on ET Now is an education in itself as besides giving us levels you also teach us how to listen to markets voice and what they are telling us about their moves.
Regards
Jitender Yadav
New Delhi

rocky said...

Does this mean live stream of global indices into our terminals??

surely exiciting then.

Sasi Uppuluri said...

Hi Sir,

Would like to ask a question - "Futures and stocks are different financial instruments, How does it happen that the price movement of Nifty stocks depend on Nifty futures? Because, if futures fall/rise then all the Nifty stocks fall/rise. How does this process actually take place?"

Thank you for your time in giving us good advice both on TV and on your blog.

Sincerely,
Sasi

Pi said...

I assume that the first index and probably the only one for some time will be S&P 500 futures. Now interestingly, it might actually see pretty good volumes, but that would depend on the contract specifications. There are two ways the contract pricing can be done -

a. Purely price based. So if S&P trades at 1250, contract here is for say 200 S&Ps, and thus of value of 2.5 lakhs and whatever the price movement is that much money will be made or lost.

b. The second way might be that while the contract will still be traded in pricing in terms of S&P value, the settlement be done in INR. So say each tick movement might be worth X dollars, and when multiplied by rupee rate it will give tick value.

For example, Nifty tick size is 0.05 and the tick value is 2.5 rupees. Similarly the tick size there will be whatever as determined by NSE (S&P futures on CMe trade in tick size of 0.25 points; as an aside - which is also interesting cause in number terms thats 0.25 on 1250, whereas in nifty it is 0.05 on 6000.I think NSE should think of changing tick size from 0.05 to 0.25 or 0.5, like we have tick of 0.0025 in USDINR futures) and the tick value will be tick size multiplied by USDINR rate.

If this method is chosen it would mean that institutions who have access to both US & Indian markets may buy the future in one market & sell in another and indirectly take an exposure on rupee movement. Since FII's are not currently allowed to operate in rupee futures, they might take aggressively to this product to bet/hedge on rupee movements. Further, it could also be used for arbitrage in the two markets, as a play on interest rates in both markets (Futures premium in both markets would wary depending on rate of interest in each) etc etc.

There will be ppl doing long/short in Nifty/S&P and carrying positions for months. So if you have view that India outperforms vice versa one can take position with reducing global event risk, thus only capturing out-performance of one index.

The smart players will find hazaar different ways of using this product and making money. I am sure whenever it will be launched there will be good liquidity and trading in them.

Avinash Nandwani said...

i will be highly obliged if you can provide your comments on the followin :
1)If friday is a down day then monday will also be a down day ?
2)And how far it holds true in a reverse situation i.e. friday up then monday will also be a up day ?

regards
Avinash Nandwani

gourv said...

Hello Sir,

Please write your blogs as before.May be ET now is paying you bit high he he...As we working professional cant watch that often..if possible please write your blogs once a day.

Regards
Gourav

shabsaif said...

Dear Sudarshan Jee,

We miss you on blogs, I believe it was good for us when you write frequently in your blog, because we don’t have time to watch TVs ( May be billions don’t watch TV, due to there daily works).

Please let me know any mutual fund scheme, which trading on base of technical analysis. I mean , the price of fund should always going up, compare to market will go up or down.

I think you should join and work for mutual fund rather than TV, so billion of investors benefitted. We are very busy in our daily life, so we just want to invest in mutual fund, and earn lot of money. So please don’t waist your time on TV.

men said...

Last 8 days no update? This will do more harm to the blog than good.

rajiv malik said...

dear sudarshan ji,

happy republic day !

we come to your blog with so much expectation. however if on a day like republic day also you have no time to update it, leave alone the trading days, it seems you have no interest left now in this blog.

tushki said...

Sir pls comment on the charts of RELIANCE....I have been making huge losses on it....

men said...

Dear Mr. Sudarshan,
I congratulate you on your crystal clear disclosures with each passing show, but updates here r not keeping same pace, also could you expand ur preferred list, as we would like a variety to choose from.
Regards,
Sudhin

men said...

ITC has come to your tgt 152 what next? CONGRATULATIONS

INDERPREET SINGH said...

Sudarshan ji
heard you on etnow, i am just a engineering student, who knows nothing about stock market and all, after hearing your presentation a new interest in stock markets have been injected deep in me, i just wanted to know, if i want to start (enter) in the market, what should i know before doing so and what shall be the perfect time to do so.
Thanks
Inderpreet Singh
Punjab

men said...

Dear Mr. Sudarshan,
Today u said that there is a possibility of nifty coming to 4K, and u also said that investors should hold on to their blue chip stocks, if the index had to fall it would be these index stocks which would fall, could you please explain the reasoning as I am not clear?
Regards,