Smart Investor: FnO Outlook

Monday, November 30, 2009

FnO Anaysis 23-27 Nov 09

The long build up in the December 2009 series was completely reversed during the expiry day, and there would be immense volatility in the current week with downward bias

After having an excellent November series during which the market rose 255 points to close at 5005.55 on the expiry date of the November series, the market tumbled on 27^th November 2009 mainly due to the concerns from the Dubai debt restructuring related concerns and its consequent impact on the Indian Banking, real estate and the construction majors. The Nifty corrected 63.80 points to close at 4941.75 on Friday, the 27^th November 2009.

All through-out the month the market fared well although on the expiry day of the November series aggressive short positions were being witnessed both in the Nifty futures as well as most of the front-line stock futures for the December series. On this day the Nifty December series ended with discount of 25 points to the underlying. Such heavy short build-up in the December series shows cautious outlook going ahead. The nifty December contract added 30.77 lakh shares in open interest (OI) to take the total OI to 2.51 crore shares. Similar was the trend in the stock futures as well. Some of the front-lines like Reliance Industries added 12.62 lakh shares in OI in the December series. So does in Tata Motors and Tata Steel, where the OI in the December series rose by 25.02 lakh shares and 27.10 lakh shares respectively. Overall the December series stock future OI increased 29.51 crore shares on 26^th November 2009. The rollover for the nifty futures was 71% and the market-wide rollover was 83%. Such aggressive OI addition was due to fresh short positions being created in the Nifty and the stock futures.

Short position continued to get build-up in the December series on Friday as well as the market on this day nose-dived before recovering a major portion during the second half of the day. The Nifty December series further added 9.90 lakh shares in OI to take the total OI to 2.61 crore shares. Similar was the case in case of several stock futures as well. The overall December series stock futures added 15.58 crore shares in OI during Friday, although Reliance shed 76.8 thousand shares in OI whereas Unitech shed 57.78 lakh shares in OI. The total OI for December contract of both these scrip's stood at 1.05 crore shares and 5.30 crore shares respectively. RNRL and ICICI Bank added 2.22 lakh shares and 4 lakh shares respectively in OI to take the total OI to 2.95 crore shares and 1.26 crore shares respectively.

Hindalco, Ambuja Cement, IDFC and JP Associates also added significant OI in the December series contracts during Friday.

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
23-Nov-09	15697	24417	38182	2482	80777
24-Nov-09	21825	29898	37144	2235	91102
25-Nov-09	17783	33034	37912	2506	91236
26-Nov-09	29616	35951	68771	2792	137130
27-Nov-09	24665	19895	49581	1934	96075
Source: NSE

Overall the market wide OI on Friday stood at 150.67 crore shares, thus gaining by 6.09 crore shares as compared to the previous trading day. A major portion of the addition was done by stock options which added 3.39 crore shares in OI. (See table OI breakup).

Open Interest (OI) break-up as on 27th November 2009
	Open Interest (OI)*	Change**
Market wide	150.67	6.09
Index Future	2.88	0.14
Stock Future	127.83	1.85
Index Options	8.77	0.70
Stock options	11.19	3.39
* No of shares in crores ** Change is vis-à-vis previous day Source: NSE

Significant amount of calls were written on the expiry date especially in the 5000, 5100 and 5200 strike December series, simultaneously aggressive put buying was witnessed in the 4800 and 4900 strikes. However on Friday 4800, 4900 and 5000 strike calls witnessed aggressive buying as the call wrote during the previous day on the 5100 and 5200 strikes were covered. Also on Friday there was some fresh buying in 4700, 4800 and 4900 strike puts. These positions seem to be a coupled position, which is being taken along with other positions in futures or stocks. Thus any inference may be premature.

The OI in the 4900 and 5000 strike call stood at 24.29 lakh shares and 33.68 lakh shares while the OI in the 4800 and 4900 strike puts stood at 40.96 lakh shares and 28.82 lakh shares respectively. (See most active Nifty options table).

Most active Nifty options (December series)

	OI
Call
Nifty 4800	1371150
Nifty 4900	2429000
Nifty 5000	3368350
Nifty 5100	2941500

Put
Nifty 4700	3125650
Nifty 4800	4095950
Nifty 4900	2881900
Nifty 5000	2883950
Source: NSE

Top 10 Open Interest (OI) gainers in December series stock futures on 27th November 2009

Scrip Name	OI*	Change*	% Change
BANKBARODA	2464000	859600	26
PFC	1125600	372000	25
SIEMENS	1036256	252672	20
HDIL	8414928	1589022	16
HINDALCO	25185362	4256780	14
ASIANPAINT	2600	400	13
IDFC	13714550	1888000	12
LT	4278800	502200	11
ORIENTBANK	964800	106800	10
FINANTECH	479400	52200	10
* No of shares Source: NSE

Top 10 Open Interest (OI) losers in December series stock futures on 27th November 2009

Scrip Name	OI*	Change*	% Change
SINTEX	588000	-102200	-21
NEYVELILIG	2243475	-333350	-17
YESBANK	2274800	-336600	-17
UNITECH	53028000	-5778000	-12
GTL	4710750	-482250	-11
DENABANK	9161250	-861000	-10
TECHM	893400	-75600	-9
TATASTEEL	10019096	-831232	-9
INDIAINFO	6835000	-557500	-9
SCI	1003200	-79200	-9
* No of shares Source: NSE

The Friday's reaction seems to be an over-reaction although the F&O activity during the November expiry day indicates cautiousness. Earlier during the previous week and also during the earlier part of the current week there was long build-up in the December series which has completely reversed during the expiry day. One thing is for certain, that there would be immense volatility with down-ward bias.

source : capitalmarket

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Monday, November 23, 2009

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