Why few future contracts like midcap50, niftyit, niftyinfra have really low volume or no volume at all?
One day I carelessly bought midcap50 instead of nifty, then I couldn’t find any buyer any to sell my lot. It took one whole day and a loss of 15k to sell it. There were totally only two lots traded for the whole day.
I feel sorry for the guy who bought it from me.
Illiquidity can be attributed to few factors like as these are introduced recently it will take time to pick up interest across various sections of traders,many are comfortable with nifty and bank nifty only as they represent major chunks of market cap, also India is still a developing market and we do not have much depth beyond few contracts.
We can relate this to chicken and egg situation, less volume is because of higher spreads and higher spreads are because of lesser volume or participation.
Ideally one should stay away from these illiquid contracts as spreads are large,market impact is more and also one has to bear with liquidity risks.