The average daily trading value in interest rate futures has fallen more than 96 per cent in the past six months to Rs 3 crore in February, according to SMC Capitals, an investment bank based in New Delhi.

The derivative contract, which was re-launched in August, had attracted a daily average trading value of Rs 77 crore in September.

“The interest rate futures market was originally introduced in June 2003. But, the market didn’t have much success and virtually vanished. But even after it was re-introduced on August 31, 2009, amid lot of hope and anticipation, if the trends of this market in terms of trading volume are anything to go by, it appears that this market is heading for a second death," said Jagannadham Thunuguntla, equity head at SMC Capitals.

Thunuguntla said aggregate trading value has declined from Rs 1,473 crore in September to Rs 57 crore in February, a fall of 96.1 per cent. Some days the value had reached as low as Rs 9 lakh. In comparison, the average trading volume on Indian equity markets is about Rs 1,00,000 crore.

“Unless some structural changes are carried out at the earliest, it seems this market is heading for a silent second death,”

he said.

This derivative product can be used to minimise interest rate risk. The buyer of an interest rate futures contract agrees to take delivery of the underlying debt instruments when it expires and the seller agrees to deliver them. The value of interest rate futures contracts rises or falls inversely to changes in interest rates.