Rising interest from general investors raised the financing from the Continued Funding System (CFS), witnessing higher demands, which had remained pegged at lower level for the past over two weeks.
The CFS financing increased from Rs 10.9 billion on previous Friday, June 16, to Rs 16.99 billion at the end of last week on June 23. This showed that interest from the retail investors present in the market was increasing. The rate of CFS also crept up from 12.8 percent to 13.9 percent, which showed increasing demand for funds.
Open interest in futures declined by around Rs 870 million, from previous week, while the rate entered the negative zone as compared to 13 percent of previous week. There were multiple reasons for this sharp drop in the futures spread. First, the next week is the rollover week. Therefore, liquidity is decreasing in the June futures. Second, the sentiment of investors was still very shaky due to the heightened volatility in the market.
The open interest position for rollover purpose was far lower than average Rs 16 billion observed in last 6 futures contracts. With this week being the rollover week, investors began to square their positions and as a consequence reduction in open interest position was observed. Interestingly, annualised Ready-Futures spreads on Friday (June 23) were found to be negative, that is, Futures prices were lower than the Ready counter prices.
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