Mini derivatives in quiet debut

 BSE, NSE unveil mini derivatives
The country's two leading stock exchanges, Bombay Stock Exchange (BSE) and National Stock Exchange (NSE) on Tuesday launched mini derivatives contract based on their main flagship indices, Sensex and Nifty.  
 

With this launch, retail investors in the country get to participate in mini derivatives contract having a market lot of five in the Bombay Stock Exchange and with 20 at National Stock Exchange.

Perception in the market is that with a smaller size market lot – due to which lower capital outlay and lower trading costs – allows for more precise hedging and flexible trading.

Besides, there could be offers for possible arbitrage between existing Sensex Futures (bigger market lot) and Sensex-mini-Futures.

According to National Stock Exchange, arbitrage is also possible between Nifty derivative contracts and Nifty mini derivative contracts. The NSE launched the mini-Nifty, while the BSE launched the ‘Chota Sensex’, within three working days of Sebi’s circular allowing such contracts

The stock exchanges have quickly acted on the approval of the Securities and Exchange Board of India (Sebi) to introduce mini derivatives contracts on equity indices. The National Stock Exchange (NSE) launched the mini-Nifty, while the Bombay Stock Exchange (BSE) launched the ‘Chota Sensex,’ within three working days of Sebi’s circular allowing such contracts. While contracts worth Rs116 crore were traded on the latter, the mini-Nifty managed trades worth Rs66 crore.

These numbers aren’t exciting for two reasons. First, they’re a fraction of the volumes on the largest index futures contract—the near-month Nifty futures, which clocked trades worth more than Rs10,000 crore. Secondly, volumes on the first day are often artificial in nature, propped up by friendly brokers to give an impression that the newly introduced contract is liquid. When NSE had introduced futures and options trading on the Nifty Junior and theCNX 100, each managed trades worth about Rs100 crore in the the near-month futures contract. On Tuesday, trades on Nifty Junior futures amounted to just Rs8.6 crore and just two futures contracts for Rs6 lakh were traded on the CNX 100.

Similarly, when the exchange had launched interest rate futures, trades on the first day were encouraging, but these contracts haven’t traded for a long time now. The future of the mini derivatives contracts will not be as bad. On NSE, they are based on the Nifty, already very popular in both the futures and options segments. This will lead to arbitrage opportunities which will ensure the survival of the product.

It’s common knowledge that corporate India has been having a rollicking time in the last few years, although growth is slowing from its earlier robust pace.
But have the good times trickled down to the smallest members of corporate India?

That’s the question we’ve tried to answer by studying the results of 443 manufacturing companies with net turnover ranging from Rs1 crore to Rs25 crore culled from Capitaline Databases.

(The minimum of Rs1 crore is purely for purposes of statistical convenience, to eliminate the extremely small companies that show huge variations in growth).
Return on capital employed (RoCE) and operating profit margins too have improved greatly in the last two years. A comparison with the BSE 500 manufacturing companies reveals the wide difference between the very small companies and the larger ones. For instance, interest cover for the companies in the Rs1-25 crore sample was 2.25 times, compared with 8.78 for companies in the BSE 500.