The Derivatives Denizen.

Your one stop derivatives guide.

April 10, 2004

Markets claw upwards. Volumes down on truncated week.

Outstanding long positions improve as bulls return.

The markets have risen by approximately 1 % on a week-on-week basis as the bears pared positions at lower levels. The bulls have started increasing their exposure as the sentiments improved. The Outstanding net long positions are up approximately 5 % on a week-on-week basis. This is an encouraging phenomena as the bulls are getting bolder by the week. The traded volumes were down, though the comparison is not justified due to a 4 day week due to good Friday. The outlook appears marginally improved as the markets clearly seek supports at 1830 levels. The support levels of below 1850 have seen bottom fishing and short covering which is a heartening sign in the near term. It is crucial that the volumes and outstanding positions and traded volumes improve simultaneously. The indicators seem to indicate that the worst is over for now. Caution is still advocated

Market internals - outstandings - all Rs crores

Description	Rupees crores	Call options	Put options	Net position
Index Futures	1310 85
Stock futures	5175 285
Index options		533 118	420 138	113 20
Stock options		1153 310	397 127	756 183
Total Futures	6485 200	Total options - net	869 163
Gross longs ( F+ O )	8,171 628	Net longs ( F+ O )	7,354 363

Observation - The outstandings have increased as the above table indicates. The noteworthy aspect is the rise in Nifty puts. That shows a short selling tendency at higher levels. This development shows a hedging of stock longs with Nifty shorts. Click here to view previous weeks file

Note - Previous weekend gross long positions Rs 7,543 crs, net long positions Rs 6,991 crs.

Source - The National Stock Exchange.

The traded volumes have fallen - but the figures for this week are pertaining to 4 sessions only due to a holiday. In the futures segment, the action is on the individual stocks as traders are taking focused views on stocks rather than a bouquet approach on the indices. We expect this trend to continue in the near term. The combination of traded volumes, open interest and market breadth are a reliable indicator of the undercurrents. The outlook appears improved ( pro-rata) as the table below indicates.

Description	April 02 - Rs. crores	April 08 - Rs. crores	Change - Rs crores
Index Futures	18,488	17,137	1,351
Stock futures	27,821	24,367	3,454
Totals - a	46,309	41,504	4,805
Index calls	977	796	181
Stock calls	2,228	1,879	349
Totals - b	3,205	2,675	530
Index puts	602	559	43
Stock puts	628	512	116
Totals - c	1,230	1,071	159
Grand totals ( a+b+c)	50,744	45,250	4,406

Source - The National Stock Exchange.

PCR - Index	0.81 : 1	Previous week	0.69 : 1
PCR - Stocks	0.33 : 1	Previous week	0.30 : 1
PCR - Total	0.36 : 1	Previous week	0.33 : 1

Observation - The PCR shows a tilt towards the bears as the ratios are showing higher short positions on a week-on-week basis. The Nifty PCR has turned outright bearish. The bulls seem to have concentrated on individual stocks. The total PCR still remains positive. The equilibrium point is 0.50 : 1. Our investors may refer to the previous weeks edition wherein it was clearly mentioned that support would come on the downsides. Open interest and traded volumes will hold the key. 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
1800 CE	93	94	01
1900 CE	29	76	47
1850 CE	38	65	27
1750 CE	58	50	08
1700 CE	46	36	10
Puts	Previous week Rs Crs	Current Rs crores	Change Rs Crs
1800 PE	46	102	56
1700 PE	69	76	07
1750 PE	66	73	07
1850 PE	07	35	28
1670 PE	16	18	02

Observation - The index contracts show which way the players are tilting. The outstanding long positions seem to have increased slower than the short positions. The bulls have added Rs 47 Crs. Our inference is - watch the 1820 levels for coming week. The bears have added Rs 100 Crs. That shows a tendency to sell the Nifty shorts at higher levels. The undertone appears cautiously optimistic for now. Click here to view previous weeks file

Source - The National Stock Exchange.

5 Highest outstanding scrips

Futures	Previous week Rs Crs	Current Rs. Crores	Change Rs Crs
SBI	411	438	27
ONGC	443	433	10
Tisco	444	432	12
Telco	274	309	35
Reliance	312	264	48
Options	Previous week Rs Crs	Current Rs. Crores	Change Rs Crs
ONGC 840 calls	54	58	04
ONGC 860 calls	25	50	25
ONGC 820 calls	38	36	02
ONGC 880 calls	10	35	25
Reliance 540 calls	33	31	02

Observation - The action remains polarised around the same big five counters - ONGC, Tisco, SBI, Reliance & Telco. Outstanding open interest in most of the stocks has fallen - a sign of caution. Watch Reliance, SBI and Tisco for directional guidance in the coming week. 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 1900 - 1850 on the long side and Tisco, SBI, ONGC & GAIL 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. 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.

Observation - Our investors are advised to watch the above highly volatile counters for signs of a bounce-back. However, other factors too need to be taken into account before a fresh trade is initiated. Note how the volatility has decreased across the board - a sign of the markets settling down at current levels.

Index heavy-weights - aggregate volatility

The index heavy-weights are showing lower volatility than the broader markets, which shows that the action is likely to be polarised around "side counters". The volatility in this category is down on a week-on-week basis. The software heavy-weights are relatively higher volatile than the old economy counters. Technology stocks are likely to remain in the focus of the trading pattern.

 

Indices - volatility

 

This price sensitive segment is for paid subscribers only

The index volatility is on the descent which shows a lower volatility in directional movement in the coming week.

Source - The National Stock Exchange.

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.