The February expiry, which was a preursor to the March expiry when the budget would be announced, has been one of the most exciting expiries where one saw the open interest touching new highs of Rs. 400 bn and more, felt the nervousness set in the market due to budget uncertainties and so on. The number of trading days was 19, starting on January 27, 2006 ending February 23, 2006, as compared to an average of 21 trading sessions of all expiries till now. Nifty touched an all-time high of 3051 on February 14 and like all previous expiries where it fell upon crossing crucial levels, it fell down to 2956 on February 20. The fall was of 96 points (approximately 3% from top).

The derivative volumes of this expiry were higher than average as compared to the previous expiries. The average daily derivatives volumes were around 3.5 times the cash volumes. The ratio of derivatives to cash volume reached a level of 5.7 and 5.5 times on February 20, 2006 and February 21, 2006 respectively reiterating the high interest in derivative instruments for hedging and speculation purpose as budgets are just around the corner. Market players preferred taking a speculative position on futures and options side rather than on the cash segment. Also, there had been high amount of hedging by various market players. All these were the triggers that shot up the volumes on the derivatives side.

The sub-segmental breakup also saw the usual bent towards futures as compared to options. Futures volume comprised of around 90% of the equity derivatives volume as compared to 10% by options. The share of index derivatives was about 40% and of stock derivatives was about 60% in the total volumes.

The current expiry started with a market open interest (consists of futures and options both) of Rs. 27

7 bn and futures open interest of Rs. 240 bn. Market wide open interest touched an all-time high of Rs. 418 bn and futures open interest touched an all-time high of Rs. 320 bn on February 21. The open interest build-ups in terms of shares also touched an all-time high. The increasing open interest was a cause of concern for various trading members (brokers), as any sharp fall would lead to a high mark to market requirement and subsequent liquidity problems. This leads to various impositions by several trading members to limit trades.

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