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Charts & Analysis

Chart: Lot Size Increase Hurts Index Futures A Little, But Doesn't Impact Stock Futures At All

We know that SEBI/NSE increased the minimum Futures and Options contract size to Rs. 5 lakh from Rs. 2 lakh. That should have crimped the buyers of options or futures, but the reality is: No, but it has fallen.

The average daily volume (based on number of actual trading days – since this is holiday season) for the month of November is around Rs. 15,500 cr. which is the lowest daily volume since November 2014. But it is greater than November 2014, which is exactly a year back.

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Stock Futures trade much higher in comparison, with over Rs. 31,000 cr. per day. That is really the second highest daily traded average volume since April:

Stock Futures Daily Turnover

We don’t consider option turnover as useful as the NSE reveals only the total exposure (which is different from the premium traded). If you look purely at premiums, option traders are :

  • Trading more in index options (premium of Rs. 1146 cr. per day versus 1114 cr. in October)
  • Trading less in stock options (daily premium of Rs. 212 cr. versus 243 cr. in Oct)

Overall, we do not find that the total volume in the market has fallen. You should not consider the number of contracts because that has no relevance – obviously contract counts will fall.

Indexes wise, the Nifty’s lot size has gone from 25 to 75, and the Bank Nifty from 25 to 30. Average trading volumes have usually been higher so it’s no surprise that volume changes weren’t much. But what is surprising is that stock futures are seeing nearly the same volumes or more!

But the market fears that volumes will crash have not come true. If anything volumes have shifted from one set of stocks to another set, but overall volumes are not very different.