FnO Analysis and Outlook

Derivatives: Fresh long build-up in the December series so early indicates positive trend

Markets will exhibit extreme volatility as we enter into the expiry week; but F&O indication suggest extreme bullishness with fresh long build-up in the December series so early

Aggressive short covering in the November series nifty and stock future during the beginning of the current week resulted in excellent start for the underlying during the beginning of the current week. However as the week progressed, there was visible activity in the December series index and stock futures. Fresh short built-up was witnessed in the nifty future as well as some of the stock futures early. Besides there were aggressive call writing of 5000 and 5100 strikes November call on the previous two days. The market opened the week with no major domestic or international triggers besides the international market activity. Thus the movement was expected to be horizontal as was witnessed during the past 4 days. However on Friday sighting firm opening by the European market the domestic index surged higher to recover the days loses and post higher. Finally the S&P Nifty closed at 5052.45 on Friday rising 63.45 points higher as compared to the previous closing. The nifty future closed at a huge premium of 13.80 points at 5066.25 on Friday. The volumes were significantly higher at Rs 98015.39 crore understandably due to significant interest in the December series as well. The average volume in the futures and option (F&O) segment during the week ended 20^th November 2009 was Rs 74819.73 crore. The dramatic recovery of the index during the second half on Friday can be mainly attributed to the huge short covering in the nifty as well as the stock futures in the current series with simultaneous fresh long positions being built in the December series.

For e.g. Nifty November future shed 14.48 lakh shares in open interest (OI) on Friday with simultaneous fresh addition of 21.76 lakh shares in December series. The Nifty November future OI stood at 2.24 crore shares whereas that of December series stood at 80.06 lakh shares. Similar trend was witnessed in some of the front-line index futures also.

Reliance December series added 2.73 lakh shares in OI to take the total OI to 11.1 lakh shares. Tata Motors November series shed 3.73 lakh shares whereas December series added 1.96 lakh shares. Same was the scenario in almost all of the frontline stock futures.

Other major front-line stock futures viz- Infosys, ICICI Bank, DLF and Maruti added significant long OI in the December series as the current months shorts were covered.

Volume in the Futures & Options segment of the NSE (Turnover (Rs. Crore.)
Date	Index Futures	Stock Futures	Index Options	Stock Options	Total
30-Oct-09	19335	20280	36957	1765	78337
3-Nov-09	18772	18585	42334	1883	81574
4-Nov-09	16337	18084	35787	2032	72239
5-Nov-09	24104	21408	48721	2265	96499
6-Nov-09	16576	19259	39632	1929	77395
9-Nov-09	15328	17800	38812	1863	73802
10-Nov-09	16991	21511	40210	2296	81008
11-Nov-09	17546	20564	46544	2310	86964
12-Nov-09	18831	19816	41012	2431	82090
13-Nov-09	15878	16889	37663	1849	72278
16-Nov-09	10787	16656	28946	2021	58411
17-Nov-09	14716	19944	34746	1895	71301
18-Nov-09	12910	20366	32034	2013	67323
19-Nov-09	16343	22417	37949	2339	79048
20-Nov-09	21356	24527	49516	2616	98015
Source: NSE

Overall the market wide OI on Friday stood at 190.70 crore shares, thus gaining by 5.85 crore shares as compared to the previous trading day. Index future added just 6 lakh shares in OI whereas the major addition was witnessed by the stock futures, which added 4.84 crore shares. (See table OI breakup).

Open Interest (OI) break-up as on 20th November 2009
	Open Interest (OI)*	Change**
Market wide	190.70	5.85
Index Future	3.31	0.06
Stock Future	143.89	4.84
Index Options	12.45	0.14
Stock options	31.05	0.82
* No of shares in crores ** Change is vis-à-vis previous day Source: NSE

In the nifty option there was fresh put writing of 4900, 5000 and 5100 strikes in the current series whereas there was aggressive covering of the call wrote earlier signifying bullish trend. Especially the 5000 strike call shed 15.42 lakh shares OI. Besides 5100 strike call also witnessed unwinding of 7.28 lakh shares in OI.

The 4900, 5000 and 5100 strike puts added 3.16 lakh shares, 9.87 lakh shares and 7.18 lakh shares in OI to take the total OI of these strikes to 57.95 lakh shares, 53.08 lakh shares and 24.37 lakh shares respectively. The 5000 strike call OI stood at 30.37 lakh shares, while that of 4900 and 5100 strikes stood at 22.92 lakh shares and 40.89 lakh shares respectively. (See most active Nifty options table).

Most active Nifty options (November series)
	OI
Call
Nifty 4900	2292200
Nifty 5000	3036600
Nifty 5100	4089350
Nifty 5200	2946500
Put
Nifty 4800	6803200
Nifty 4900	5794800
Nifty 5000	5308100
Nifty 5100	2436800
Source: NSE

Top 10 Open Interest (OI) gainers in November series stock futures on 20th November 2009

Scrip Name	OI*	Change*	% Change
DENABANK	10972500	3496500	24
ORIENTBANK	1048800	189600	15
ANDHRABANK	1476600	253000	15
SUNTV	364000	59000	14
JPHYDRO	10471875	1653125	14
UCOBANK	7405000	1125000	13
SYNDIBANK	2504200	349600	12
IDFC	9864800	1230150	11
HCLTECH	1137500	135200	11
ALBK	3966550	458150	10
* No of shares Source: NSE

Top 10 Open Interest (OI) losers in November series stock futures on 20th November 2009

Scrip Name	OI*	Change*	% Change
KOTAKBANK	1296900	-646800	-99
ULTRACEMCO	542000	-188800	-53
KSOILS	11056600	-3475100	-46
ASIANPAINT	7600	-2200	-41
CUMMINSIND	180500	-46550	-35
ABAN	1656800	-323200	-24
PFC	930000	-140400	-18
BRFL	3977850	-578450	-17
DLF	10835200	-1552000	-17
NTPC	7769125	-1100125	-16
* No of shares Source: NSE

As we enter into the expiry week the trend looks positive although the markets will exhibit extreme volatility, which is usual during the expiry week. F&O indication suggests extreme bullishness. The fresh long build-up in the December series so early, though unusual is very positive.

Source : capital market

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