Sunday, October 31, 2010

FnO Analysis Oct 2010

Concerns over the quantum of quantitative easing by the Federal Reserve at its policy meeting in early November 2010 and the consequent weak global indices led the domestic benchmark to correct as well during the week ended 29thOctober 2010. Understandably the volatility was high due to the expiry of the October Futures & options (F&O) series. The extent of fall was arrested on Friday as impressive quarterly result performance by ICICI Bank led the nifty index to close higher on Friday. Overall so far the second quarter September 2010 results have been encouraging. The domestic benchmark S&P nifty corrected 48.35 points during the week under review to close at 6017.70.

All through-out the week the nifty October series closed at a premium to the underlying despite being the expiry thus indicating that fresh long positions being created in the November series as longs in the October series were covered. The aggressive selling in the cash segment throughout the week further kept the nifty future at premium.

On Friday however the activity in the F&O segment was benign. During the full week under review the nifty November series added 1.97 crore shares in open interest (OI) and on Friday the total OI in nifty stood at 2.43 crore shares. While the action in the nifty futures and optionwas pretty neutral as far as the market direction is concerned, the signs in the nifty option segment indicated bearish positions being taken.

A significant number of out-of-the money nifty calls were written aggressive while out-of-the-money nifty puts were bought on Wednesday and the expiry day indicating strong resistance for the underlying going ahead. While in the money call and put nifty options witnessed virtually no interest during all the 3 previous trading days. ..

Overall on Wednesday the nifty call option added 37.64 lakh shares in net OI while the nifty put option added 13.56 lakh shares in net OI. On the expiry day the overall nifty call option added 42.46 lakh shares in net OI while the nifty put option added 20.67 lakh shares in net OI. Most of the additions were in out-of-the-money strikes. The rollover too was dull to wards the end of the expiry in the stock futures segment. The index put-call ratio on Friday stood at 0.97 as compared to 1.01 the previous day, while the stock put-call ratio fell to 0.27.

Open Interest (OI) break-up as on 29th October 2010
Open Interest (OI)*Change**
Market wide250.2210.51
Index Future2.820.02
Stock Future218.332.93
Index Options11.461.40
Stock options17.616.16
* No of shares in crore
** Change is vis-à-vis previous day
Source: NSE

The market-wide OI on Friday increased by 10.51 crore shares to 250.22 crore shares as compared to the previous trading day. Most of this OI addition happened in the stock futures and option segment. (See the OI break-up table)

Most active Nifty options (November 2010 series)
Nifty 60002338400
Nifty 61004110250
Nifty 62004246750
Nifty 65004367600
Nifty 57003624950
Nifty 58004641450
Nifty 59003414300
Nifty 60005345150
Source: NSE

The most active nifty call options were the 6100 to 6500 strikes of the November series which witnessed aggressive writing while the most active puts were the 5700 to 6000 strikes of the same series where aggressive buying was seen. On Thursday the 6300 strike added 10.34 lakh shares in OI to take its total OI to 36.38 lakh shares, while the 6100 and 6200 strike added 4.86 lakh shares and 3.30 lakh shares in OI to take their respective OI to 29.08 lakh shares and 35.37 lakh shares. The 6500 strike November expiry call also added 8.54 lakh shares in OI on the expiry day. On the nifty November put option front substantial OI addition were witnessed in the 5900 and 6000 strikes. Both these strikes added 10 lakh and 11.86 lakh shares in OI on Thursday to take their respective OI to 25.85 lakh shares and 42.83 lakh shares respectively. (See the most active nifty option table)

Top 10 Open Interest (OI) gainers in November series stock futures on 29th October 2010
Scrip NameOI*Change*% Change
* No of shares
Source: NSE

Top 10 Open Interest (OI) losers in November series stock futures on 29th October 2010
Scrip NameOI*Change*% Change
* No of shares
Source: NSE

The domestic bourses going ahead will take cues from the US Federal Reserves quantitative easing measures and domestically the quarter results of the companies that are yet to be announced will provide stock specific action. There is strong resistance at the 6100 and above levels and the benchmark is expected to trade horizontal for some time.

Source : Capital Market

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