Monday, November 29, 1999

We expect to launch more int`l indices in India

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Ahead of the launch of S&P 500 futures in India, Alexander J Matturri, executive managing director, Standard & Poor's Index & Portfolio Services, spoke to Muthukumar K and Bijith R on the potential growth in India, emerging trends and future plans. Excerpts:You are venturing outside US for the first time to launch local currency denominated S&P 500 futures.As Indian investors look outside India for equity investments, rupee denominated global indices like S&P 500 futures is expected to become an important tool to hedge portfolio risks. We expect more Indian investors to diversify their portfolio outside of India. And indices like S&P 500 futures could meet varied needs of different class of investors from speculators to portfolio hedgers.The growth potential in India and China (and Asia in general) is great. India, with a very high savings rate, is expected to develop a strong equity culture.Any other markets you are looking at?India is the first market where we created non-dollar version of index derivatives. Foreign investors already have access to dollar index traded on the CME (Chicago Mercantile Exchange). Whether we develop other local currency version remains to be seen. That is something that we are studying now.Any other international indices that will be locally launched?Over time, we will work in conjunction with IISL(India Index Services Limited), joint venture of NSE and Crisil, and expect to launch more international indices into the Indian market.Do you see shift in volumes for S&P 500 futures (away from CME) once it is launched on the NSE platform?It is too early to tell what the buying trend will be. But it will not have major impact on CME volumes as it is non-dollar based and is targeting a different set of investor class.How challenging is it to popularise S&P 500 futures in India ? Retail volumes are large in case of Indian derivatives ?In terms of individual investors, they need education process that NSE will be doing and we will work in conjunction with NSE to make people understand the index, its features and how to use .S&P 500 is widely used index in the world. And I think lot of people are aware of S&P 500. Somewhere between 20-25% of the trading on the futures contract done on the CME happens outside of the US trading hour. So, there is quite a bit of liquidity that occurs before and after the US market trading hours . With the rupee based products, local investors will trade at the same time when dollar based contracts are traded in the US.Style indices are not yet in India. Your thoughts?As the capital markets evolves, investors look at more sophisticated products, which means looking at equity in many different ways. And not just in terms of broad equity exposure, but by capitalisation, by style and eventually across asset classes. Again every market has different levels of sophistication and use of these indices.

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