Derivatives: Huge volatility expected with downward bias
Overall indications are negative on weak global markets, and we expect volatility with huge downward bias as we enter the expiry week; possible announcements from the government before the budget on the fiscal stimulus withdrawal too can impact marke
For the full week the nifty corrected 216.20 points and the nifty future closed at discount all throughout the week thus emitting negative undertone. The nifty future discount widened to 16.35 points on Friday. Longs in the January series were seen getting covered; while fresh shorts in February series was seen created. The nifty January series shed 2.80 lakh shares in open interest (OI) to take the total OI to 2.50 crore shares. The February series added 25.77 lakh shares in OI on Friday to take the total OI to 72.75 lakh shares. The volumes increased considerably to wards the end of the week and on Friday the volumes in the F&O segment increased to Rs 1.32 lakh crore. Some of the major stock future counter also witnessed similar trends with rollover of the current series and fresh shorts being created in the February series. The January series stock future shed 11.58 crore shares in OI, while the February series added 11.65 crore shares on Friday. Fresh short being created both at the Nifty and the stock future front is a major negative indicator.
Besides, the trend in the nifty option front was not positive either with calls being written from 4900 to 5200 strikes. The overall trend looks absolutely negative. Now that most of the major companies have already declared their results, the trigger till the budget would be the trend in the global markets.
| Volume in the Futures & Options segment of the NSE (Turnover (Rs. Crore.) | |||||
| Date | Index Futures | Stock Futures | Index Options | Stock Options | Total |
| 4-Jan-10 | 7411 | 15019 | 18075 | 2054 | 42559 |
| 5-Jan-10 | 10499 | 22359 | 23829 | 2913 | 59599 |
| 6-Jan-10 | 9636 | 21199 | 19377 | 2490 | 52702 |
| 7-Jan-10 | 10029 | 20382 | 20455 | 2546 | 53412 |
| 8-Jan-10 | 8568 | 19503 | 17843 | 2567 | 48482 |
| 11-Jan-10 | 8032 | 17918 | 17631 | 2435 | 46016 |
| 12-Jan-10 | 13898 | 21359 | 30853 | 3225 | 69334 |
| 13-Jan-10 | 13654 | 21718 | 32394 | 3117 | 70882 |
| 14-Jan-10 | 9220 | 19698 | 24641 | 2729 | 56287 |
| 15-Jan-10 | 7556 | 18912 | 19830 | 2581 | 48880 |
| 18-Jan-10 | 11100 | 19235 | 27427 | 2463 | 60224 |
| 19-Jan-10 | 11825 | 19770 | 29293 | 2554 | 63442 |
| 20-Jan-10 | 11664 | 20774 | 30552 | 2575 | 65566 |
| 21-Jan-10 | 23846 | 24795 | 59416 | 3060 | 111117 |
| 22-Jan-10 | 27790 | 28506 | 72774 | 3323 | 132392 |
| Source: NSE | |||||
Overall the market wide OI on Friday stood at 222.10 crore shares, thus rising by 1.42 crore shares as compared to the previous day. Additions as compared to the previous week was 17.17 crore shares. Major activity was witnessed in the index and stock options segment. (See table OI breakup).
| Open Interest (OI) break-up as on 22nd January 2010 | ||
| Open Interest (OI)* | Change** | |
| Market wide | 222.10 | 1.42 |
| Index Future | 3.56 | 0.23 |
| Stock Future | 168.75 | 0.10 |
| Index Options | 12.66 | 0.50 |
| Stock options | 37.13 | 0.59 |
| * No of shares in crore ** Change is vis-à-vis previous day Source: NSE | ||
The most active options in the January series were the 4900 to 5200 strikes. The call option on the above mentioned strikes witnessed aggressive writing, while the puts at these strikes were wound up. The OI in 5000, 5100 and 5200 call increased by 28.53 lakh shares, 7.83 lakh shares and 6.23 lakh shares respectively while puts of these strikes shed OI. Thus as we enter the expiry week 5000 levels for the nifty would be the key level below which the market looks extremely bearish. (See most active Nifty options table).
| Most active Nifty options (January 2010 series) | |
| OI | |
| Call | |
| Nifty 5000 | 4048250 |
| Nifty 5100 | 4121200 |
| Nifty 5200 | 6371250 |
| Nifty 5300 | 8561250 |
| Put | |
| Nifty 5000 | 5816450 |
| Nifty 5100 | 3416100 |
| Nifty 5200 | 2548400 |
| Nifty 5300 | 1524250 |
| Source: NSE | |
| Top 10 Open Interest (OI) gainers in January series stock futures on 22nd January 2010 | |||
| Scrip Name | OI* | Change* | % Change |
| PUNJLLOYD | 13890000 | 2203500 | 19 |
| HCLTECH | 1799200 | 260000 | 17 |
| GAIL | 2561625 | 309375 | 14 |
| SUNTV | 232000 | 28000 | 14 |
| GRASIM | 489632 | 30624 | 7 |
| ONGC | 1858275 | 112500 | 6 |
| HDFCBANK | 1778600 | 100800 | 6 |
| BHEL | 1415400 | 54900 | 4 |
| IVRCLINFRA | 2710000 | 74000 | 3 |
| BANKINDIA | 1536150 | 40850 | 3 |
| * No of shares Source: NSE | |||
| Top 10 Open Interest (OI) losers in January series stock futures on 22nd January 2010 | |||
| Scrip Name | OI* | Change* | % Change |
| PETRONET | 4862000 | -2428800 | -33 |
| ULTRACEMCO | 444400 | -201200 | -31 |
| BHARATFORG | 2698000 | -1108000 | -29 |
| DRREDDY | 401600 | -148400 | -27 |
| IDEA | 27054000 | -9984600 | -27 |
| SINTEX | 1374800 | -358400 | -21 |
| BAJAJ-AUTO | 232000 | -58600 | -20 |
| KOTAKBANK | 1486650 | -371800 | -20 |
| WIPRO | 2031600 | -501000 | -20 |
| MCDOWELL-N | 772250 | -180000 | -19 |
| * No of shares Source: NSE | |||
5000 at the nifty level could act as a psychological support. Overall the sentiment looks bearish as evident from such shorts being created both at the nifty and the stock futures. In the absence of any major domestic triggers the global markets will remain the key trigger. There could be some announcements from the government before the budget on the fiscal stimulus withdrawal. Thus the overall indications are negative. Expect volatility with huge downward bias as we enter the expiry week.
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