Sunday, November 8, 2009

Market up-move continues to look uncertain

Though the activity in the global market will dictate, the fresh bearish position builds up in the nifty as well as the stock futures and options indicate market do not have the strength required to continue to maintain its growth momentum

The week started on an extremely negative note as the nifty corrected by 147.80 points to close at 4563.90 points. The sell-off was triggered by the news that the Comptroller and Auditor General (CAG) has set up a team to examine the expenses Reliance Industries (RIL) incurred on its D6 natural gas field in the Krishna-Godavari (KG) basin in the Bay of Bengal. The correction was further exasperated by the bleak scenario in the European markets and US index futures. During this day huge short positions were created in the stock and Nifty November series. However positive comments by the Finance Minister Pranab Mukherjee, that there are no immediate plans to place curbs on capital inflows, besides strong global stocks indices enabled the domestic benchmark to come back strongly. The Nifty rose 146.90 points to close at 4710.80. The shorts that were created the previous day were aggressively un-wound. For e.g. Nifty November series it self witnessed unwinding of 23.47 lakh shares of short position open interest (OI) created the previous day. The trend was the same in the front-line stock futures as well. Then for the proceeding three days the market closed on a positive note. For the full week ended 6thNovember 2009 the nifty index rose 84.45 points to close at 4796.15. However the Nifty future closed at a discount of 6 points to the underlying. The global market weakness and the worry of unwinding of US $ carry trade and the consequent asset bubble burst and US$ appreciation continue to remain. Despite the rally the market does not signify convincing strength, as is evident from the future market activity during the past few days.

Volume in the Futures & Options segment of the NSE (Turnover (Rs. Crore.)
DateIndex FuturesStock FuturesIndex OptionsStock OptionsTotal
30-Oct-09193352028036957176578337
3-Nov-09187721858542334188381574
4-Nov-09163371808435787203272239
5-Nov-09241042140848721226596499
6-Nov-09165761925939632192977395
Source: NSE

On Friday 6th November the Nifty closed 30.60 points higher at 4796.15. The OI trend in the Nifty and the stock futures remained directionless. As the week closed the nifty continued to shed OI signifying short covering. Besides the trend in the stock futures were also the same. The total OI for the Nifty November series further shed 8.65 lakh shares to 2.76 crore shares. Overall the market wide OI on Friday stood at 158.62 crore shares, thus gaining by just 7 lakh shares as compared to the previous trading day. As mentioned earlier the index future and the overall stock future witnessed un-winding of OI signifying continued short covering. For e.g. the index future shed 6 lakh shares in OI compared to the previous day whereas the stock futures shed 1.77 crore shares in OI. The stock option contributed the major addition in OI. (See table OI breakup).

Open Interest (OI) break-up as on 6th November 2009
Open Interest (OI)*Change**
Market wide158.620.07
Index Future3.05-0.06
Stock Future125.44-1.77
Index Options10.150.31
Stock options19.971.59
* No of shares in crores
** Change is vis-à-vis previous day
Source: NSE

In the Nifty option front the most active call options were the 4600 to 4900 strike calls and 4500 to 4700 strike puts. The 4600 and 4700 strike calls unwound 1.98 lakh shares and 2.89 lakh shares in OI signifying covering of calls bought earlier whereas 4800 and 4900 call strikes witnessed 6.1 lakh shares and 5.1 lakh shares addition of OI. The concurrent premium decline of these strikes indicates call wrote at these levels. Besides 4400 strikes put witnessed unwinding of 6.2 lakh shares in OI, whereas 4500, 4600 and 4700 strike puts witnessed addition of 2.1 lakh shares, 9.7 lakh shares and 8.5 lakh shares addition in OI respectively. The concurrent premium increase indicates puts bought at these strikes. Thus these indicate bearish signal. The OI in the 4800 and 4900 strikes call increased to 40.02 lakh shares and 41.27 lakh shares respectively. The OI in the 4600 and 4700 strikes puts increased to 58.90 lakh shares and 46.46 lakh shares respectively. (See most active Nifty options table).

Most active Nifty options (November series)
OI
Call
Nifty 46001459900
Nifty 47003126350
Nifty 48004002200
Nifty 49004126700
Put
Nifty 45004597950
Nifty 46005889500
Nifty 47004646100
Nifty 48003014100
Source: NSE

Top 10 Open Interest (OI) gainers in November series stock futures on 6th November 2009
Scrip NameOI*Change*% Change
TATACHEM109755033345023
ASHOKLEY10590950318970023
POLARIS258720065520020
INDIANB208340050380019
TATAPOWER191080041560018
VOLTAS217350041310016
MPHASIS213760036800015
BAJAJHIND14469450210330013
INDHOTEL487663270642813
PANTALOONR178245024905012
* No of shares
Source: NSE

Top 10 Open Interest (OI) losers in November series stock futures on 6th November 2009
Scrip NameOI*Change*% Change
HCLTECH1158300-258700-29
CROMPGREAV409000-87000-27
SINTEX347200-57400-20
SUZLON60420000-9549000-19
BANKINDIA1980750-288800-17
BHUSANSTL424000-58500-16
NAGARCONST1334000-172000-15
ASIANPAINT14200-1800-15
ONGC1253475-144900-13
IDFC9761550-1103300-13
* No of shares
Source: NSE

The market do not seem to have the strength required to continue to maintain its growth momentum as fresh bearish position builds up in the nifty as well as the stock futures and options. Going ahead the activity in the global market will be the key as the mood there is also gloomy.

Source : capitalmarket

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