Don’t Miss this Data

Data is the new oil, has become the buzzword for almost a decade now. We have moved from being a data starved to a data overloaded market. Infact, the problem now is how to cut the noise and understand things better. At the click of a mouse one can get whatever information one needs on a stock or market. Therefore, more important is to filter it and analyse it.

In the case of derivatives also, there is a lot of information that is available. One can easily see the gross and net positions of each participant class: Individual, Prop, DII and FII. Also, one can know the sub segment wise positions and stock wise positions in each sub segment. Net-net one can get a clear picture about how the positions are and have moved from day on day or week to week or expiry to expiry.

In this analysis one data point needs some special attention and that is Nifty futures. While in normal analysis and reporting the positions that are seen are just the ones on NSE, what one misses are the positions at Singapore Exchange. The positions there are significant enough to be ignored. So, first let’s understand the contract structure of Singapore Nifty.

Lot Size: $2*Nifty Index Price. Assuming Inr 75/- to a $ and Nifty at 10950, comes to nearly 16.35 lakhs currently.

Tick Size: 0.5 Index Point, $1.

Expiry Day: Last Thursday of the expiring contract month. If this falls on an NSE non-business day, the last trading day shall be the preceding business day.

Contract Months: 2 nearest serial months and 4 quarterly months on March, June, September and December cycle.

Settlement Price: The Final Settlement Price shall be the official closing price of the Nifty 50 Index, which is derived based on the average weighted prices of the individual component stocks of the index during the last 30 minutes of trading. The official closing price will be rounded to two decimal places.

Settlement Type: Cash Settlement

Timings: Mon-Fri – 6:30 am – 3:45 pm IST, Same day settlement.
Mon-Fri – 4:45 pm – 10:30 pm IST, Next day settlement.
On expiry day this session will not happen.

In terms of open interest, it is near Inr 13500 crores at NSE, while in Singapore it is near Inr 36000 crores. In terms of average daily volumes, at NSE it would be near 17000 crores while at Singapore it would be near 9000 crores. So, clearly NSE has more volumes but less open positions and vice versa for open interest. A major cause for this dichotomy is that lot of volumes of FIIs and prop desks has moved to Singapore. 

Few reasons for this shift are: 

• The contract being $ denominated, currency hedging is built in.
• The trading hours in Singapore supplement more trading, because it is in line with opening of all the Asian markets.
• Margins are lower and also there is cross margining benefit against positions in other indices.
• The tax on trades in India is much higher than that in Singapore.

In order to understand the total positions in Nifty it is crucial to understand what is happening in Singapore Nifty as well. So, don’t miss this data point.

Happy Trading!!!

Cheers.