Sunday, November 7, 2010

BSE Weekly Review 5th Nov 2010

It was a pre-Diwali rally for the domestic bourses as it appreciated 294.75 points to close at 6312.45, well above all the major resistance level. It scaled record closing highs during the special 45-minute Muhurat trading session held on 5 November 2010, to mark the beginning of the Samvat Year 2067. The derivative data on 5th November is not taken for analysis as the trading volume on this day was very thin. The earlier major resistance level of 6200 level has turned to be a major support now as evident from aggressive put writing of 6300 and up strikes.

Strong opening of the Coal India IPO resulted in the profit coming back to the market while the Foreign Institutional Investor's (FII's) continued mopping up Indian equities. Strong flow from the FII is expected to continue after QE2 (Quantitative easing- 2) by the FED as new money supply will venture out for higher yield asset class in the emerging markets. Although there are concerns of a bubble being generated in the emerging markets in such a scenario, the structural strength of the Indian economy will place it in good stead going ahead. There was strong addition of open interest (OI) across the Futures and Options (F&O) segments and the nifty November series closed at a premium to the underlying on all the trading days during the week ended 5th November 2010.

The nifty November series added 2.7 lakh shares in OI to take its total OI to 2.51 crore shares. The trend was aggressively covering of the short positions while fresh longs were being generated in both the nifty as well as the stock futures. Even in the nifty and the stock option front the bearish positions were covered while fresh bullish positions were created. For e.g. the in-the-money nifty calls written earlier were covered while fresh out-of-the-money calls were bought. Also nifty in-the-money puts witnessed aggressive writing.

The average volume in the F&O segment was Rs 77689 crore, and the nifty November future on Friday closed at 12.60 points premium to the underlying on this day at 6325.05. The index put-call ratio on Friday increased to 1.38 as compared to 1.10 the previous day, while the stock put-call ratio fell to 0.22. The market put-call ratio increased significantly on Friday to 1.27 as compared to 1.01 on the previous day.

The market-wide OI on Friday increased by 4.84 crore shares to 277.89 crore shares as compared to the previous trading day. Most of this OI addition happened in the stock futures and option segment. As compared to the end of the previous week, the market added 27.67 crore shares in OI

Most active Nifty options (November 2010 series)
Nifty 6200 3801300
Nifty 6300 4346850
Nifty 6400 4497200
Nifty 6500 6153200

Nifty 6100 5518500
Nifty 6200 3800900
Nifty 6300 2298450
Nifty 6400 282100
Source: NSE

On 4th November OI in the November nifty till 6300 strikes were aggressively covered while fresh calls were bought at 6400 and up strikes. For e.g. the 6200 and 6300 strike call option of the November series shed 10.04 lakh shares and 3.87 lakh shares in OI to take their respective OI to 38.01 lakh shares and 43.47 lakh shares respectively. The 6400 and 6500 strike call added 5.60 lakh shares and 9.89 lakh shares in OI while the 6600 strike added 2.66 lakh shares in OI. Similarly the 6200 and 6300 put strike of the November series added 9.35 lakh shares and 14.17 lakh shares in OI due to aggressive writing to take their respective OI to 38 lakh shares and 22.98 lakh shares. (See the most active nifty option table) Top 10 Open Interest (OI) gainers in November series stock futures on 4th November 2010

Scrip Name OI* Change* % Change
ESCORTS 750000 311000 71
HINDOILEXP 2319000 803000 53
TATAMTRDVR 1069250 366000 52
OIL 34750 11750 51
MAX 680000 196000 40
CENTRALBK 2078000 598000 40
NMDC 2838000 649000 30
DCB 5612000 916000 20
IRB 639000 103000 19
STRTECH 1344000 208000 18
* No of shares
Source: NSE

Top 10 Open Interest (OI) losers in November series stock futures on 4th November 2010
Scrip Name OI* Change* % Change
GMDCLTD 2456000 -554000 -18
GESHIP 1753000 -354000 -17
HDFC 5633750 -894375 -14
RNRL 25608000 -3568000 -12
ONGC 2434500 -326250 -12
TATACHEM 2878000 -318000 -10
PFC 946000 -83000 -8
PETRONET 7402000 -628000 -8
HEXAWARE 2300000 -160000 -7
NAGARFERT 31056000 -2008000 -6
* No of shares
Source: NSE

Prominent action in the 6200 strike call option and the 6300 strike put option indicate strong support at these levels. These very levels were strong resistance during the end of the previous week. Action in the global market going ahead especially in the US will be closely watched while the US President Mr. Barak Obama's India visit will also be watched by the market to take any strategic mileage from it. Continued strong fund flow will remain the key.

Source :CapitalMarket

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