New products to spice up capital markets
The Indian equity markets are scaling new highs every day and, already, rank as the 10th largest globally. SEBI chief M. Damodaran has promised to introduce more products to further deepen the markets, particularly in the futures and options segment, and make it more investor-friendly.
Derivatives trading has been a big success in India. This has encouraged exchanges and the market regulator to experiment with more products, particularly those based on an index.
The NSE has launched derivatives contracts on two indices—CNX100 and CNX Nifty Junior—recently to give investors an opportunity to hedge their stocks portfolio.
In the pipeline is another index-based product, Nifty Mid-Cap 50. But market participants are unimpressed.
Says Siddarth Bhamre, Fund Manager (Derivatives), Angel Broking, a stock broking house: “The market doesn’t necessarily need more products. SEBI should focus on making existing products more liquid.” Market players also feel that SEBI will do well to reduce the cost structure of options contracts which is preventing jobbers and arbitrageurs from flocking to the market and, in turn, is impacting liquidity.
Says Bhamre: “The securities transaction tax can sometimes amount to 50 per cent of the gross profits of jobbers. SEBI can explore the possibility of giving them special incentives, like waiving STT.”
In the pipeline
SEBI and NSE are adding depth to the Indian capital market by launching new products.
| NAME OF PRODUCT | WHAT IT WILL DO |
| Derivatives on CNX100 | Allow investors to catch the broad Indian market movements |
| Derivatives on CNX Nifty Junior | Opportunity to invest in stocks outside the Nifty basket |
| Derivatives on Nifty Mid-Cap 50 | Investors can hedge their mid-cap portfolio |
