Will nsE move enhance hedging or speculation?
Benefits business firms, investors, but higher cost for brokerage firms, say experts
image for illustrative purpose
Hyderabad: The latest decision of NSE to extend trading hours for interest rate derivatives may help investors, who trade globally, but will definitely add to the speculation, observe market analysts.
“At this juncture, I believe that India doesn’t need longer trading hours. Further, derivatives are meant for hedging purpose, but it’s triggering more speculation on the bourses. Coming to the industry, the move may benefit top industrial houses, but not MSMEs,” said a senior official at a leading brokerage firm, on a condition of anonymity.
The longer trading hours in interest rate derivatives will benefit business firms to take larger deals till 5pm, says Federation of Telangana Chambers of Commerce and Industry (FTCCI). “This will not only increase the volumes and depth in the markets, but will create an opportunity for Indian business houses to enter into larger business deals till 5pm. This will facilitate hedging of our deals upto5 pm. Previously, it was very risky for Indian businessmen to enter into large deals after 3:30pm because the hedging option was not open to them. Now, international trades involving various currencies will be having hedging opportunities till 5 pm. Major events involving fluctuations in these currencies can be absorbed by our businessmen immediately rather than waiting for markets to open next day,”Anil Agarwal, president, FTCCI, tells Bizz Buzz.
The trading volume in interest rate futures is low when compared with equity and currency derivatives trading. The major advantage is that it’ll improve trade volumes, observe derivatives analysts.
Dhirender Singh Bisht, senior market analyst at SMC Global Securities Ltd, said: “Definitely it’ll increase the cost for the brokerage firms as extended trading hours require more manpower to execute the orders, Further back office needs to work till 7pm. The advantage is that it’ll enhance volumes and helps aligning with global markets to some extent. From investors’ point of view, it helps those who trade globally.”
“It may not benefit retail investors, but helpful for hedge funds and institutions. When retail investors start participating in government securities, then only it’s beneficial. But it takes time. Extension of trading hours helps capturing moments in global markets. So, hedge funds and institutions take advantage of the extended trading hours,” adds Ch Jagadeshwara Rao, ED, Saketa Investment Securities.
