FnO Analysis Oct 2010

Concerns over the quantum of quantitative easing by the Federal Reserve at its policy meeting in early November 2010 and the consequent weak global indices led the domestic benchmark to correct as well during the week ended 29^thOctober 2010. Understandably the volatility was high due to the expiry of the October Futures & options (F&O) series. The extent of fall was arrested on Friday as impressive quarterly result performance by ICICI Bank led the nifty index to close higher on Friday. Overall so far the second quarter September 2010 results have been encouraging. The domestic benchmark S&P nifty corrected 48.35 points during the week under review to close at 6017.70.

All through-out the week the nifty October series closed at a premium to the underlying despite being the expiry thus indicating that fresh long positions being created in the November series as longs in the October series were covered. The aggressive selling in the cash segment throughout the week further kept the nifty future at premium.

On Friday however the activity in the F&O segment was benign. During the full week under review the nifty November series added 1.97 crore shares in open interest (OI) and on Friday the total OI in nifty stood at 2.43 crore shares. While the action in the nifty futures and optionwas pretty neutral as far as the market direction is concerned, the signs in the nifty option segment indicated bearish positions being taken.

A significant number of out-of-the money nifty calls were written aggressive while out-of-the-money nifty puts were bought on Wednesday and the expiry day indicating strong resistance for the underlying going ahead. While in the money call and put nifty options witnessed virtually no interest during all the 3 previous trading days. ..

Overall on Wednesday the nifty call option added 37.64 lakh shares in net OI while the nifty put option added 13.56 lakh shares in net OI. On the expiry day the overall nifty call option added 42.46 lakh shares in net OI while the nifty put option added 20.67 lakh shares in net OI. Most of the additions were in out-of-the-money strikes. The rollover too was dull to wards the end of the expiry in the stock futures segment. The index put-call ratio on Friday stood at 0.97 as compared to 1.01 the previous day, while the stock put-call ratio fell to 0.27.

Open Interest (OI) break-up as on 29th October 2010
	Open Interest (OI)*	Change**
Market wide	250.22	10.51
Index Future	2.82	0.02
Stock Future	218.33	2.93
Index Options	11.46	1.40
Stock options	17.61	6.16
* No of shares in crore
** Change is vis-à-vis previous day
Source: NSE

The market-wide OI on Friday increased by 10.51 crore shares to 250.22 crore shares as compared to the previous trading day. Most of this OI addition happened in the stock futures and option segment. (See the OI break-up table)

Most active Nifty options (November 2010 series)
	OI
Call
Nifty 6000	2338400
Nifty 6100	4110250
Nifty 6200	4246750
Nifty 6500	4367600
Put
Nifty 5700	3624950
Nifty 5800	4641450
Nifty 5900	3414300
Nifty 6000	5345150
Source: NSE

The most active nifty call options were the 6100 to 6500 strikes of the November series which witnessed aggressive writing while the most active puts were the 5700 to 6000 strikes of the same series where aggressive buying was seen. On Thursday the 6300 strike added 10.34 lakh shares in OI to take its total OI to 36.38 lakh shares, while the 6100 and 6200 strike added 4.86 lakh shares and 3.30 lakh shares in OI to take their respective OI to 29.08 lakh shares and 35.37 lakh shares. The 6500 strike November expiry call also added 8.54 lakh shares in OI on the expiry day. On the nifty November put option front substantial OI addition were witnessed in the 5900 and 6000 strikes. Both these strikes added 10 lakh and 11.86 lakh shares in OI on Thursday to take their respective OI to 25.85 lakh shares and 42.83 lakh shares respectively. (See the most active nifty option table)

Top 10 Open Interest (OI) gainers in November series stock futures on 29th October 2010
Scrip Name	OI*	Change*	% Change
3IINFOTECH	1072000	1072000	100
ALOKTEXT	12050000	12050000	100
BAJAJHLDNG	18000	18000	100
BATAINDIA	18000	18000	100
BOMDYEING	24000	24000	100
CENTRALBK	500000	500000	100
DCB	1688000	1688000	100
ESCORTS	104000	104000	100
HAVELLS	115000	115000	100
HINDOILEXP	1046000	1046000	100
* No of shares Source: NSE

Top 10 Open Interest (OI) losers in November series stock futures on 29th October 2010
Scrip Name	OI*	Change*	% Change
HINDALCO	14134000	-3464000	-20
HEXAWARE	2512000	-464000	-16
LUPIN	1892500	-347500	-16
TATACHEM	3494500	-485500	-12
ANDHRABANK	4812000	-668000	-12
ORCHIDCHEM	7790000	-912000	-10
UNIPHOS	8070000	-938000	-10
HINDZINC	174500	-20000	-10
COLPAL	284000	-29500	-9
JSWSTEEL	3824500	-388250	-9
* No of shares Source: NSE

The domestic bourses going ahead will take cues from the US Federal Reserves quantitative easing measures and domestically the quarter results of the companies that are yet to be announced will provide stock specific action. There is strong resistance at the 6100 and above levels and the benchmark is expected to trade horizontal for some time.

Source : Capital Market

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Monthly Review Oct 2010

The benchmark index of the Bombay Stock Exchange (BSE) posted its first monthly decline in five months, but closed 0.5% higher on Friday, propped up by a late surge in ICICI Bank, which soared after posting better-than-expected quarterly earnings.

Investors await an eventful week — marked by US Federal Reserve’s two-day meet ending Wednesday, the Reserve Bank of India’s policy review on Tuesday and Coal India’s listing on bourses on Thursday — for directional cues. Most economists in a Reuters poll on Thursday expected the central bank to raise rates by at least 25 basis points to rein in stubbornly high inflation in the fastgrowing economy. It would be the sixth increase since mid-March.

Top private lender ICICI Bank rose 6.5%, its best single-day gain in more than 15 months, as it beat forecasts with a 19% rise in quarterly net profit, helped by robust credit growth and fewer bad debts.

The stock rose as much as 7.7% to Rs 1,174, its highest level since February 2008. The 30-share BSE index edged up 0.46%, or 91.30 points, to 20,032.34, with only nine of its components closing in the green.

“There is not much to read in this month’s decline. There were just bouts of profit sales after the rally we saw in September,” said Rakesh Rawal, head of private wealth management at broking firm Anand Rathi. It declined 0.2% this month, first monthly drop after May. The benchmark index had gained 11.7% in September which was its best gain in 16 months. “It is not a panic situation or a sign of big worry,” said Mr Rawal, adding he expected the Sensex to test a new record high by end-December. The 30-share index is still up 14.7% year to date, as foreign funds have invested $24.7 billion in Indian equities in the period. It is around 1,200 points away from its alltime high witnessed in January 2008.

Though most earnings did not disappoint the street, they lacked big positive surprises, which investors had started to factor in the price, Rawal said. India along with Singapore, Indonesia, Thailand and Phil-ippines slowed in terms of earnings momentum in the last three months from the previous three months while Hong Kong, China and Malaysia showed an improvement, UBS said in a note on Thursday. Cigarette-to-hotel business ITC firmed 2.3% as its September quarter net profit rose 23.5%.

Metals pack lost sheen as base metals fell across the board ahead of US GDP data later in the day and the Fed meeting next week. Non-ferrous metals producer Sterlite Industries and aluminium producer Hindalco dropped 1.1% and 2.8%, respectively, and Tata Steel , world’s seventh-largest maker of the alloy shed 2.4%.

Source ET

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Market Khabar 13th Sept 2010

Buoyed by better-than-expected US data, markets across the globe had a positive week during the week ended. Ignoring the surge in food inflation and flood situation in many parts of the country, benchmark indices closed at a 32-month high.

On the BSE, the Sensex surged towards 19,000-levels closing at 18,800 gaining 579 points and the Nifty on the NSE ended 161 points higher at 5,640. The indices are now only 11 per cent below their all-time high. Market breadth continued to be positive with heightened activity in many midcap and smallcap counters. Stick to stocks that have stood the test of time.

Weekend IIP numbers were pleasant surprise with exceptional performance from capital goods sector. Despite the base effect, analysts feel that the economy is slowly inching towards high-growth path.

However, the faster-than-expected growth has also revived expectations of monetary tightening by RBI in its next review. Barring any surprises from the global front, advance tax numbers and expectations over second quarter numbers may determine near term direction of markets.

For the week ahead, chartists predict a trading range of 18,520 and 19,180 for the Sensex and 5,500 and 5,780 for the Nifty. Strong resistance can come at 18,960 and 19,100 and 5,685 and 5,740. Immediate supports are at 18,670 and 18,540 and 5,610 and 5,560. Stock markets are becoming more and more volatile. The stock market reacts to breaking news by shooting stock prices higher one day, then pounding them lower the next. So, be flexible.

FUTURES & OPTIONS
Mirroring the strong bullish undertone, robust volumes were seen in the derivative segment. Sentiment indicators like open interest, implied volatility, put/call ratio and VIX reflect a positive undercurrent. Open interest build up in the Nifty5700 strike opti-ons reflects bullish trend in the market currently.

Metal stocks are back in the limelight. Tata Steel, JSPL and Hindalco look good for targets of Rs 650, Rs 800 and Rs 210 in next few weeks. Capital goods stocks BHEL, L&T, Crompton Greaves, BGR Energy, Voltas and Cummins can touch targets of Rs 2,650, Rs 1,975, Rs 340, Rs 900, Rs 255 and Rs 800 in the near term.

US restrictions on outsourcing is unlikely to hurt IT majors significantly. Analysts feel that present sloganeering is only for election gains. Accumulate on declines good counters like Infosys, TCS, HCL Tech and Wipro. Disclosure of Satyam’s restated results may give fillip to stock price of Tech Mahindra.

Led by SBI, banking counters were on a roll. Further gains are likely in BOI, BOB, Corporation Bank, ICICI Bank, IDBI Bank, Kotak Bank, Federal Bank and PNB. Ride the boom in the sector with trailing stop loss.

Neglected sectors such as fertilisers, sugar and paper are getting a‘re-look’ from savvy punters. Stories of decontrol, price revisions are doing rounds. Adopt buy on rumour; sell on news strategy. Among the stocks looking good are Chambal Fertiliser, Dabur, Godrej Industries, HCC, IDFC, Noida Toll, Piramal Health, Opto Circuits, United Spirits and Onmobile.

A good trader need to have — A chronic inability to accept things at face value, to feel continuously unsettled, and to have humility.

STOCK SCAN
Micro Technologies Ltd is one of the leading electronic security devices company with product diversity in various segments as vehicle, premises, mobile, other assets and now diversified into energy, health and agriculture also. The company has been listed as one of the best under $1 billion firms by Forbes. Book value of `281, trailing 12 month EPS of `45 and high OPM of 39 per cent make the stock good buy for target price of `350 in medium term.

Mahindra Forgings Ltd, a M&M group company, is one of the finest and amongst the top three forging companies in India, with an installed capacity of 42,000 tonnes. It is the largest supplier of forged components like crankshafts and steering knuckles, commanding a 40 per cent market share. Buy on declines for a price target of `200.

Analysts predict turnaround results in second quarter from Heritage Foods. Reports of improvement in the operational performance of retail division and likely demerger of it are indicated by company insiders. Stay invested for further gains.

Apart from being the second largest phosphatic player in the country, Coromandel International has made impressive strides in specialty nutrients and crop protection chemicals. Buy on declines for a target price of `900 in medium term. Select midcap companies like Crew BOS, Rane Holdings, Greaves Cotton, TIL and Foods & Inns are witnessing good buying from savvy market players. Buy on declines for steady gains in medium term. Renewed buying is likely to be seen in Vishnu Chemicals, AP Petro and Pochiraju Industries. Stay invested for further gains.

C. Kutumba Rao is a Hyderabad-based stock market analyst. The views expressed and the recommendations made are those of the author. Readers are strongly recommended to consult their financial advisors before making any financial investments. This newspaper is not liable for investment decisions made on the basis of recommendations in these columns.

Source : Deccanchronicle.com

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Market Khabar 22 March 2010

Markets posted gains for the sixth straight week on the back of firm global trends, good advance tax numbers for fourth quarter and S&P upgrade of sovereign rating.

On the BSE, the Sensex gained 412 points to close at 17,578 and the Nifty on the NSE rose by 126 points to end at 4,263. However, broader markets witnessed hesitant mood and only select midcap and smallcap stocks were participant to action. Despite positive macro economic numbers and aggressive buying from FIIs, markets have not moved into fast-track mode. Dullness in secondary markets has been attributed to vibrant primary market and flow of domestic institutional funds to FPOs of PSUs.

Weekend announcement of a hike in repo and reverse repo rates by RBI may see markets open lower on Monday. The timing of the move ahead of the announc-ement of credit policy in next few weeks clearly shows the RBI’s intent to fight inflation. Market players feel that the quantum of rise in rates is very small, and advise buying good stocks in the corrective phase. Key events to watch in the coming week are F&O settlement and global developments from Euro zone.

For the week ahead, chartists predict a trading band of 17,050-17,950 for the Sensex and 5,110-5380 for the Nifty. Immediate supports for the indices exist at 17,260 and 17,090 and 5,180 and 5,010. Expectedly plenty of resistance was seen to the indices closer to recent highs of 7,790 and 5,310. Buy good standard stocks that stood test of time.

FUTURES & OPTIONS
Ahead of the settlement week, robust volumes were seen in the derivatives segment. Sentiment indicators such as open interest at record levels, high put/call ratio, implied volatility and VIX indicate that volatility may stage comeback. Keep a close watch on rollovers after the initial knee jerk reaction to RBI policy move.

With frontline counters RIL, ICICI Bank, Bharti and Infosys providing posting gains in the recent recovery, a correction in these counters may turn short-term trend weak.

RBI moves to control potential inflationary spiral through rate hikes without sacrificing growth are expected to benefit PSU banks.

Begin accumulating PSU bank counters on every decline for outperforming returns. Rate hike may trigger selling in rate sensitive sectors such as auto and realty. However, avoid aggressive shorts and use sharp declines for buying frontline counters in the sectors. Punters feel that a rate hike has been factored partially already.

The bidding process for 3G spectrum has spiced up the telecom sector. Stay invested for near term gains in Bharti, RCom and Idea. Ahead of fourth quarter results, good buying is seen in IT stocks on expectations of strong performance. Buy on declines frontline counters such as Infosys, TCS, HCL Tech and Wipro.

Among the counters looking good for short-term are BEL, Bajaj Hindustan, Dr Reddy’s, Welspun Gujarat, Cummins, United Spirits, PowerGrid, Cairn, MTNL, Chambal and Apollo Tyres. IT refund expected to boost fourth quarter earnings of MTNL.

With the new teams for next IPL season auctioned at steep valuations, punters expect heightened action in IPL counters India Cements and DCHL. Sharp movement likely in airline counters Jet Airways and KFA. Investigate each stock thoroughly before deciding to buy it.

STOCK SCAN
Clariant Chemicals (India) Ltd is one of India’s leading specialty chemicals companies and is the number one player in pigments, textile chemicals, leather chemicals and diketene based agro intermediates. Despite tough times for the user industries, the chemical manufacturer has performed well during the year ended to earn Rs 47 per share. Buy this stock at current levels for a target price of Rs 800.

Deepak Fertilisers and Petrochemicals Corp Ltd is one of the largest manufacturers of industrial chemicals with presence in chemicals, agribusiness and specialty retailing. It is the only producer of IPA in the country and has recently expanded TAN capacity to global scale. Buy for a medium-term price target of Rs 125.

Rapid ramp up in mining operations and short-term triggers from subsidiary OMML and scheduled capacity increase make Adhunik Metaliks a good bet at current levels.

Sandur is engaged in the business of mining manganese and iron ore, producing sponge iron, project consultancy and supervision. Firm trends in ore prices have put the counter back in limelight. Buy the company’s stock on declines for a four-figure price target in the near term.

C. Kutumba Rao is a Hyderabad-based stock market analyst. The views expressed and the recommendations made are those of the author. Readers are strongly recommended to consult their financial advisors before making any financial investments. This newspaper is not liable for investment decisions made on the basis of recommendations in these columns.

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