What is the impact cost seen in trading Nifty?
In calendar 1996, on average, the impact cost faced in buying Rs.5 million of the Nifty portfolio was 0.25% or so. This means that if the index level is 1000, then a buy order of Rs.5 million is executed at 1002.5 and a sell order is executed at 997.5. This is the lowest level of transactions costs seen in market indexes in India. An example of the impact cost analysis of Nifty is shown in Figure 2.1, which uses data for 5 June 1996, and shows how the impact cost in trades on Nifty varies as the transaction size is increased.
