Yet another widely- tracked global index is coming to India. After the National Stock Exchange (NSE) listed the Dow Jones Industrial and S&P 500 on its platform last week, the Bombay Stock Exchange is set to respond by listing the US-based Nasdaq 100 index.
"We intend to offer options contracts of Nasdaq 100. Approval from the Securities and Exchange Board of India is expected any time," said Ashish Chauhan, deputy CEO at BSE.
The Nasdaq index does not contain financial companies, which differentiates it from the Dow. It also does not include companies incorporated outside the US, which distinguishes it from the S&P.
The Nasdaq 100 was launched in January 1985 on the US-based Nasdaq exchange platform, that was promoting itself in the shadow of the New York Stock Exchange.
It is a equity index of 100 of the largest non-financial companies. The companies' weights in the index are based on their market capitalisation, with rules capping the influence of the largest components. The index witnesses average daily volumes of 200,000 shares in the US.
Not giving a deadline for launch of the new index, Chauhan said BSE was in the process of developing contract specifications for the Nasdaq 100. It would extend the liquidity enhancement scheme for trading in the global index, which it had already announced
The scheme will be operational from October 26 and the exchange will spend Rs 100 crore for promoting its derivative segment.
Under such schemes, the exchanges incentivise traders to generate volumes in the futures and options contract of the underlying product on their platforms. Sebi has allowed this scheme to be operational for six months from the date of its commencement.
The NSE, where Dow and S&P started trading last week, has also launched a market making scheme. On the NSE, both global indices have witnessed average daily trades worth Rs 100-150 crore over the past week.
"There is immense need for making international indices like S&P and Dow available in India. There is a large segment of traders and investors in the country, who regularly trade on these indices. Bringing them here would bring a lot of convenience for trade," said Ashik Patel of ALB Stock Broking, an Ahmedabad-based broker and member of NSE and BSE.
Traders can take advantage of these indices by hedging their positions. NSE, a leader in equity derivatives, sees average daily volumes of Rs 80,000 crore. The BSE has been making persistent attempts to develop this segment.
In recent months, its physical settlements in derivatives had not picked up as anticipated. Market players hope the volumes would see some rise, as the exchange is spending a lot of money to attract traders.