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 wide | 213.63 | 9.62 | -50.54 |
| Index Future | 2.32 | 0.02 | -0.66 |
| Stock Future | 187.11 | 3.79 | -17.97 |
| Index Options | 8.96 | 0.85 | -7.07 |
| Stock options | 15.24 | 4.96 | -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 5700 | 3953500 |
| Nifty 5800 | 4044500 |
| Nifty 5900 | 2775950 |
| Nifty 6000 | 2679800 |
| Put | |
| Nifty 5200 | 3720800 |
| Nifty 5300 | 5942100 |
| Nifty 5400 | 4933450 |
| Nifty 5500 | 3761750 |
| 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# | |
| Reliance | 1.17 | -0.12 | 0.72 |
| Tata Motors | 0.64 | -0.05 | 0.35 |
| RCOM | 2.19 | -0.16 | 1.57 |
| SBIN | 0.43 | -0.10 | 0.34 |
| Tata Steel | 1.02 | -0.52 | 0.88 |
| * 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 Name | OI* | Change* | % Change |
| COLPAL | 149000 | 27250 | 22 |
| GTL | 4893500 | 885500 | 22 |
| RAYMOND | 650000 | 104000 | 19 |
| VIDEOIND | 5250000 | 718000 | 16 |
| BOMDYEING | 835000 | 108000 | 15 |
| RELIANCE | 16275000 | 1966500 | 14 |
| ONGC | 11560000 | 1289000 | 13 |
| RANBAXY | 1854000 | 202000 | 12 |
| GMDCLTD | 800000 | 86000 | 12 |
| TRIVENI | 2126000 | 228000 | 12 |
| * 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 Name | OI* | Change* | % Change |
| PFC | 5581000 | -842000 | -13 |
| HINDALCO | 15052000 | -1525000 | -9 |
| TATAGLOBAL | 6644000 | -508000 | -7 |
| RENUKA | 29024000 | -2028000 | -7 |
| IDFC | 25112000 | -1688000 | -6 |
| GSPL | 6168000 | -380000 | -6 |
| DLF | 23970000 | -1027000 | -4 |
| BGRENERGY | 1215000 | -51500 | -4 |
| NMDC | 613000 | -25000 | -4 |
| IOC | 2598000 | -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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