Open interest at the futures counter last week rose by 9.5 percent, but the weighted average spread dropped to one of its lowest positions of 7.74 percent. The lacklustre situation in the ready market was also having its impact in the futures market.
This was clearly indicated by the rising futures open interest positions and the simultaneous decline in the ready futures spread. Total open interest during the week increased by about 9.50 percent to reach Rs 16.99 billion as compared to Rs15.50 billion of previous week.
Weighted average futures spread, which had already dropped to single digit preceding week, declined even further, to close at 7.74 percent on Friday May 12 as compared to 9.70 percent of May 5).
Spreads on most of the blue chip scrips are in single digit, whereas for some stock it is even below 5.0 percent, like DGKC, PTCL and Luck.
These extraordinarily lower spreads become even more worrisome, when considered in the light of two important facts. First, it is only the second week of the futures counter, in which the spreads usually remain in the range of 15-18 percent (near the CFS rate). Second and more importantly, the liquidity situation in the interbank money market remained severely tight throughout the week.
The above-mentioned factors strongly point to the possibility of excessive short-selling that could be taking place in the futures market, which is keeping futures spreads depressed.
The weighted average CFS rate, which had dropped from its upper limit on previous Friday (May 5) to 15.0 percent, again increased to 17.1 percent on last Friday (May 12).
However, during the week, the rate fell to as low as 14.70 percent on Wednesday and Thursday, which interestingly shows that banks, mutual funds and other financial institutions were very keen to finance the transactions despite acute liquidity shortage in the interbank money market.
Moreover, it also shows that these financial institutions are happy to invest their money in the CFS, and not directly in the market, due to the web of uncertainty surrounding the market currently.