praveen

Why is the equity cash market in India said to have

A: India’s “cash market” for equity is ostensibly a cash market, but it functions like a
futures markets in every respect.
NSE’s “EQ” market is a weekly futures market with tuesday expiration. The trading
modalities on NSE from wednesday to tuesday, in trading ITC, are exactly those that
would be seen if a futures market was running on ITC with tuesday expiration. On NSE,
when a person buys on thursday, he is not obligated to do delivery and payment right
away, and this buy position can be reversed on friday thus leaving no net obligations.
Equity trading on NSE involves leverage of seven times. Like all futures markets, trading
at the NSE is centralised and there is no counterparty risk owing to novation at the clearing
corporation (NSCC).
The only difference between ITC trading on NSE, and ITC trading on a true futures
market, is that futures contracts with several different expiration dates would all trade at
the same time on a true futures market; this is absent on India’s “cash market”.