About fifty per cent of the 51 stocks excluded saw their stock prices decline by more than three per cent. Post the announcement by SEBI to reduce the number of illiquid stocks and reduce manipulation, the NSE excluded 51 stocks from their F&O segment.
Of the total 51 stocks, only seven saw their stock prices move up — MTNL, Polaris Financial Technology, Glaxosmithkline, Bajaj Holdings & Investment, Great Eastern Shipping, Cummins India and Alstom India. .
According to market players, the removal of these stocks has led to unwinding of long positions which saw their stock prices fall. “Some of these stocks had seen long open interest accumulation. So investors are getting out of these stocks now,” said a derivatives analyst with an Indian brokerage firm.
An open interest position of a trader refers to the number of futures and options contracts that have not been settled or delivered that day. Since the excluded stocks will not be available in the F&O segment post September, traders were forced to pare their positions.
Not FIIs, DIIs darlings
Analysts also reckon that the exclusion will not lead to a significant drop in volumes in the F&O segment, asthese stocks’ contribution are negligible in terms of open interest , they said. “These stocks were a favourite of the retail segment. There was never much FII and DII activity on these stocks,” the derivatives analysts said.
For some analysts it is about looking at it from a “glass half-full” perspective. “This is good for the industry as this will bring in volumes into the cash market. Volumes in the cash market have come down by about 60 per cent from the peak. The move to exclude these stocks from the F&O segment could see investors buying these stocks in the cash market,” said Mr Mr B. Gopkumar, Head of Broking at Kotak Securities. In the last few years, more and more stocks had been included in the F&O segment..
He added that this is good for the broking industry as well, as margins in the F&O segment are lower than those in the cash market. “Most retail investors do not understand the F&O market. They have been losing money as the F&O segment is speculation-based. So from a long-term perspective, it is better for them to own stocks in cash, than in the F&O market,” he said.