Sunday, July 3, 2011

BSE / NSE Weekly Review - 1st July 2011

Aggressive buying of the out-of-the-money put and writing of the out-of-the-money call indicates bearish outlook



Source: NSE

The domestic market rose in four of the last five trading days buoyed by the easing Greece debt worries and strong buying by the Foreign Institutional Investors (FII). The benchmark nifty rose by 176.15 points during the week till the expiry day as major shorts in the June series were aggressive covered, while fresh long position in the index and stock future were created. Although the volumes on Friday were thin, the position buildup in the Future & Options (F&O) July series do not look encouraging. Huge call writing was witnessed in the 5600 and up strike call option of the July series. Similarly out-of-the-money puts were aggressive bought on Friday. On Friday the market fell 20.20 points to close at 5627.20.

The nifty July future closed at a premium of 11.20 points at 5638.40 on Friday. On the expiry day the nifty July series added 46.71 lakh shares in open interest (OI) while on Friday the activity was thin and the nifty July series added further 75 thousand shares in OI to take the total OI to 2.08 crore shares. Despite being an expiry week, the volumes remained unimpressive, and the average volume in the F&O segment during the week stood at Rs 147845.52 crore. The domestic inflation still remains a major concern and the Whole sale price index (WPI) going ahead is expected to remain firm following the hike in diesel, LPG and Kerosene prices recently. The Q1FY12 quarterly numbers will remain crucial for the market in the proceeding weeks. Beginning with the Infosys numbers, several of the other index heavyweight numbers will dictate the short term mood in the market. Overall volatility is expected to be the core in the market as some of the players in the commodity space are expected to face margin squeeze due to high input costs.

F&O segment-wise volume analysis



Source: NSE

The index put-call ratio on Friday stood at 1.22, while the stock put-call ratio stood at 0.35. The overall put-call ratio on Friday stood at 1.14, thus indicating an oversold scenario in the index options.

Open Interest (OI) break-up as on 1st July 2011

Open Interest (OI) break-up as on 1st July 2011

Open Interest (OI)*Change**Change#
Market wide213.639.62-50.54
Index Future2.320.02-0.66
Stock Future187.113.79-17.97
Index Options8.960.85-7.07
Stock options15.244.96-24.84
* No of shares in crores
** Change is vis-à-vis previous day
# Change is vis-à-vis previous week
Source: NSE

The market-wide OI on Friday stood at 213.63 crore shares, 9.62 crore shares higher than the previous day and 50.54 crore shares lower than the end of the previous week. The stock future and option segment witnessed significant addition of OI during Friday as compared to the previous day. (See the OI break-up table)

Most active Nifty options (July 2011 series)

Most active Nifty options (July 2011 series)

OI
Call
Nifty 57003953500
Nifty 58004044500
Nifty 59002775950
Nifty 60002679800


Put
Nifty 52003720800
Nifty 53005942100
Nifty 54004933450
Nifty 55003761750
Source: NSE

On Friday the 5600 and up strike nifty call option of the July series added significant OI due to writing. For e.g. the 5700, 5800 and 6000 strike nifty call of the July series added 8.08 lakh shares, 3.74 lakh shares and 8.51 lakh shares in OI to take their respective total OI to 39.54 lakh shares, 40.45 lakh shares and 26.80 lakh shares respectively. The 5600 strike call option also added 1.64 lakh shares in OI due to writing. On the other hand out-of-the-money put option witnessed aggressive buying. The 5300 strike put added 22.62 lakh shares in OI to take its total OI to 59.42 lakh shares on Friday. The 5400 strike put too added 9.45 lakh shares. Put buying at such low levels indicate bearish mood. (See the most active nifty option table)

Open Interest (OI) of major July 2011 series stock futures as on 1st July 2011

Open Interest (OI) of major July 2011 series stock futures as on 1st July 2011

Open Interest (OI)*Change**Change#
Reliance1.17-0.120.72
Tata Motors0.64-0.050.35
RCOM2.19-0.161.57
SBIN0.43-0.100.34
Tata Steel1.02-0.520.88
* No of shares in crores
** Change is vis-à-vis previous day
# Change is vis-à-vis previous week
Source: NSE

Top 10 Open Interest (OI) gainers in July 2011 series stock futures on 1st July 2011

Top 10 Open Interest (OI) gainers in July 2011 series stock futures on 1st July 2011
Scrip NameOI*Change*% Change
COLPAL1490002725022
GTL489350088550022
RAYMOND65000010400019
VIDEOIND525000071800016
BOMDYEING83500010800015
RELIANCE16275000196650014
ONGC11560000128900013
RANBAXY185400020200012
GMDCLTD8000008600012
TRIVENI212600022800012
* No of shares
Source: NSE

Top 10 Open Interest (OI) losers in July 2011 series stock futures on 1st July 2011

Top 10 Open Interest (OI) losers in July 2011 series stock futures on 1st July 2011
Scrip NameOI*Change*% Change
PFC5581000-842000-13
HINDALCO15052000-1525000-9
TATAGLOBAL6644000-508000-7
RENUKA29024000-2028000-7
IDFC25112000-1688000-6
GSPL6168000-380000-6
DLF23970000-1027000-4
BGRENERGY1215000-51500-4
NMDC613000-25000-4
IOC2598000-103000-4
* No of shares
Source: NSE

Huge resistance is expected going ahead, while the bias downward is more. The Q1FY12 result outcome and the FII allocation towards India will remain crucial. On the macro side things do not look favorable. The rally during the previous week was driven more by global sentiments than by genuine delivery purchase. Thus the market may witness sharp correction in the days ahead.

Our Recommendation :

Markets will now move sector / scrip specific investors are advised caution - wait for the trend to trade.

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