Traders look for a future in Hang Seng

Index Futures In HK Bring Profits

"WHAT is in a name?" asked Shakespeare. Day traders on Dalal Street could not agree more. If trading in an index future nets decent profits at the end of the day and gives them their daily high, it does not matter if that index is called Hang Seng or Nifty.
    Faced with shrinking volumes and volatility in the futures and options (F&O) market in India, some adventurous day traders have decided to seek their fortunes in the Hong Kong market, but without the trouble of having to emigrate.
    For the past few weeks, day trader Amol Bhovad (name changed), and his friends in the same profession, have been starting their trading activities at 8 in the morning (Hong Kong is two and a half hours ahead of India, and trading starts at 10:00 am local time). Thanks to a tie-up with a broker in Hong Kong, who has provided them access to an online software enabling them to trade on the Hong Kong Stock Exchange, Bhovad and his group can directly trade in Hang Seng futures, subject to the limits specified by their broker.
    This is similar to the software provided by some leading retail brokerages, whereby traders can transact over the internet at a speed very close to that offered by lease lines. 'Internet trading in Hang Seng
futures cheaper'
    ACCORDING to Bhovad, two key factors why they zeroed in on Hang Seng are transaction costs and the daily movement in the index.
    The transaction cost on Rs 1 crore worth of Nifty futures, inclusive of securities transaction tax, stamp duty, turnover fees etc, works out to around Rs 1,280. It costs about one fourth of that to transact in Rs 1 crore worth of Hang Seng futures over the net.
    Also, the Hang Seng is somewhat similar to the Nifty in terms of its constitution. The Nifty consists of 50 stocks, while the Hang Seng is made up of 43 stocks. Also Hang Seng futures are liquid without the index being too volatile.
    "We are just beginning to get a feel of that market," says Bhovad, "it will be some time before we can make consistent profits, but we are confident of getting there in the next couple of months."
    For Bhovad, like most other day traders, profit margins have been squeezed by the ongoing slump in the stock market since January this year and the move to remove the income tax rebate on STT and instead treat that as a business income.
    "Being enabled to trade in Hang Seng is one thing, but making profits on those trades is quite another," says Om Prakash Damani, director Pratibhuti Vinihit, and with over two decades of experience as a trader. He dismisses the new-found interest in Hang Seng as a fad, one that will die out before long.
    "For that matter you can trade in any international market sitting in India, but unless you are well acquainted with those markets, the probability of losing money is higher," he adds. Market watchers say a few reputed market operators had tried dabbling in oil futures in the last couple of months, but lost a packet after their bets went awry.