The Derivatives Denizen.

Your one stop derivatives guide.

Sept 04, 2004

Markets rally on thin volumes. Bulls enhance poisitions.

FII outstanding long positions at 3400 crs.

The markets have risen 2 % on a week-on-week basis on 32 % lower volumes as the retail participants seem to have abstained largely from short term trades. The bulls seemed to be on the offensive in the markets as oil prices are the decline. The Outstanding net long positions are up approximately 18 % on a week-on-week basis. This is a positive development as the OI has increased in the futures and options segment. The outlook appears to be optimistic as the markets are above a short term resistance at the 1617 levels which if violated on a continous close basis, will see 1603 levels. The Nifty futures trade at Rs 5 discount to cash, which is due to the ex-dividend factor of select stocks. The stocks of the week are likely to be TCS & Tisco.

Market internals - outstandings - all Rs crores

Description	Rupees crores	Call options	Put options	Net position
Index Futures	1,412 164
Stock futures	4,727 637
Index options		459 200	433 221	26  21
Stock options		839 401	310 194	529  207
Total Futures	6139 801	Total options - net	555 186
Gross longs ( F+ O )	7,437 1411	Net longs ( F+ O )	6,694 996

Observation - The net out-standings have increased as the above table indicates. This is a positive development as the rise is seen in almost all the segment. The bulls seem to be hedging their stock long positions by short selling the Nifty.  Click here to view previous weeks file

Note - Previous weekend gross long positions Rs 6,026 crs, net long positions Rs 5,698 crs.

Source - The National Stock Exchange.

It maybe noted that FII's now hold approximately Rs 3,400 crs in open interest which is a substantial portion of the entire market open interest. The FII's seem to be concentrating on stock futures and then Index futures in that order of preference. Please note that FII's have bought more futures than they have sold on Sept 02, 2004. That indicates buying in the near term. Purchases of Rs 155 crs are seen in the cash segment on that day.

Source - The National Stock Exchange.

The traded volumes have crashed - a negative sign as the markets have risen on poor volumes post expiry. The traded turnover was lower in almost all the segments. We want the volumes to rise in the coming week if the markets are to see retail participation. The combination of traded volumes, open interest and put / call ratios are a reliable indicator of the undercurrents. The outlook appears cautious in the short term. Click here to view previous weeks file

Description	Previous week - Rs. crores	Current - Rs. crores	Change - Rs crores
Index Futures	13,498	8,271	5,227
Stock futures	25,173	17,404	7,769
Totals - a	38,671	25,675	12,996
Index calls	1,002	1,570	568
Stock calls	1,910	692	1218
Totals - b	2,912	2,262	650
Index puts	794	516	278
Stock puts	701	508	193
Totals - c	1,495	1,024	471
Grand totals ( a+b+c)	43,078	28,961	14,117

Source - The National Stock Exchange.

PCR - Index	0.97 : 1	Previous week	0.87: 1
PCR - Stocks	0.37 : 1	Previous week	0.27 : 1
PCR - Total	0.42 : 1	Previous week	0.33 : 1

Observation - The PCR shows a tilt towards the bears as the ratios are showing bearish activity building up all over on a week-on-week basis. The Nifty PCR remains outright bearish, the shorts have risen faster than the longs. This ( PCR ) will be the one of the most reliable indicator of market trends. The total PCR has remained positive. The equilibrium point is 0.50 : 1. Click here to view previous weeks file

Source - The National Stock Exchange.

Market internals - Nifty put / call trends - 5 highest open interest contracts

Calls	Previous week Rs Crs	Current Rs crores	Change Rs Crs
1600 CE	99	119	20
1650 CE	54	130	76
1630 CE	07	33	26
1620 CE	20	38	18
1670 CE	23	54	31
Puts	Previous week Rs Crs	Current Rs crores	Change Rs Crs
1600 PE	60	186	126
1550 PE	96	117	21
1500 PE	24	27	03
1650 PE	11	27	16
1590 PE	03	16	13

Observation - The index contracts show which way the players are tilting. The outstanding positions seem to have increased all round in the previous week. The bulls have added Rs 171 Crs. Our inference is - watch the 1605 support levels for the coming week. The bears have added Rs 179 Crs. That shows a tendency towards building up shorts at lower strike prices. The undertone appears cautiously optimistic for now. Click here to view previous weeks file

Source - The National Stock Exchange.

Top 5 scrips with positive changes in open interest

Top 5 scrips with negative changes in open interest

Source - The National Stock Exchange.

5 Highest outstanding scrips

Futures	Previous week Rs Crs	Current Rs. Crores	Change Rs Crs
TCS	325	426	101
Tisco	377	408	31
Reliance	401	407	06
Telco	332	359	27
SBI	256	323	67

Options	Previous week Rs Crs	Current Rs. Crores	Change Rs Crs
TCS 1000 calls	29	45	16
TCS 1100 Calls	24	31	07
Tisco 250 calls	17	28	11
Tisco 260 calls	15	27	12
Satyam 350 calls	07	23	16

Observation - The action remains polarised around the same big counters - Tisco, Reliance, SBI & Telco. Outstanding open interest in all the stocks has risen - a positive phenomena after expiry. Watch Reliance for directional guidance in the coming week, as we have been emphasising since over a month. Click here to view previous weeks file.

Most active calls - top 10

Most active puts - top 10

The activity is polarised around the Nifty between the 1580 - 1600 on the long side and Satyam Computers, Reliance & Tisco in individual stocks.

 

Source - The National Stock Exchange.

Volatility is a F&O traders best friend. We have split the volatility readings of the stocks in two segments - above the market average and below the market average. It is obvious that higher than average volatility will see a larger move in either direction and therefore benefit a savvy intraday / short term trader. Please note how the volatility has fallen sharply across the board since the last 3 months. It will have an impact on the margins payable by futures traders. It is wiser to avoid those stocks which show lower volatility readings if you want short term profits. Keep watching this space for regular updates.

This segment is for paid subscribers only.

Have a profitable day.

 

Vijay L. Bhambwani

Ceo :- Bsplindia.com

The author is a Mumbai  based investment consultant and invites feedback at Vijay@BSPLindia.com and  (022) 23438482 / 23400345.

SEBI disclosure -  The author has no positions in  the stocks mentioned above.

---

Legal  notice :-  The Professional  Ticker  Reader  & the Derivatives Denizen are trademarks  of  Bhambwani  Securities (P) Ltd.  and  any unauthorised  replication / duplication  in part or full  will  be infringing  our  trademark and  will  result in  legal  action  being  enforced  on  the  infringing  persons / parties.

---

While all due care has been taken while in compiling the data enclosed herein, we cannot be held responsible for errors, if any, creeping in. Please  consult  an  independent  qualified  investment  advisor  before  taking  investment  decisions. This mail is not sent unsolicited, and only advisory in nature. We have accepted no consideration from any company mentioned above and recommend taking decisions on merits of the stocks from our viewpoint. This email is being sent to you as a paid subscriber. Please protect your interests and ours by not disclosing the contents to any un-authorised  person/s.