The Bombay Stock Exchange (BSE) plans to launch the Sensex in the bourses of the BRICS nations by March-April to give investors in other developing countries a chance to diversify into a new asset class, said Mr Ashishkumar Chauhan, Deputy CEO, Bombay Stock Exchange (BSE).
The Sensex will be launched in emerging nations like Brazil, Russia, Hong Kong and South Africa. Reciprocally, the Bovespa, MICEX, Hang Seng and JSE of the respective countries mentioned will be launched in India.
“Retail as well as institutional investors will be able to trade in their own currencies on these indices. BSE will receive royalty on each trade,” said Mr Chauhan. “It is easier to trade on these indices as we have overlapping time zones with these countries,” he said.
BSE seems to be following the National Stock Exchange (NSE), which has introduced derivatives on foreign indices – the Standard & Poor's 500 (S&P 500) and Dow Jones Industry Average. The European FTSE 100 is going to soon to be available for trade on the NSE, according to the NSE Web site.
It was decided to permit stock exchanges to introduce derivative contracts (Futures and Options) on foreign stock indices in the equity derivatives segment, according to a circular issued by the Securities and Exchange Board of India (SEBI) in January last year. Following the announcement, NSE introduced derivative contracts on global indices-S&P 500 and DJIA in August 2011.
The top 20 contracts show that traded volumes on foreign indices are still low. The index futures of the Dow Jones Industrial Average (DJIA) expiring on March 16 have traded 3,740 contracts till date. Index futures on S&P500 expiring on March 16 have traded 2, 887 contracts. The trading volumes in index options of S&P-500 are only in double-digit figures.
“The volumes traded on these global indices may be low today because there is not enough awareness about this. It will be a good diversification if these developing countries indices can be traded in India. The BRICS story seems good and trading in these indices will be beneficial for long term investors,” said Mr Gopal Agrawal, CIO and Head Equity, Mirae Asset. “There will be more HNI investment in these foreign stock indices, and products may be launched to take advantage of these,” said Mr Agrawal.