The Derivatives Denizen.

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April 19, 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 12 % on a week-on-week basis. This is an encouraging phenomena as the bulls are getting bolder by the week. The traded volumes were steady, though the comparison is not justified due to a 4 day week due to a holiday last week. 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.

Market internals - outstandings - all Rs crores

Description	Rupees crores	Call options	Put options	Net position
Index Futures	1,665 355
Stock futures	5,901 726
Index options		621 88	508 88	113 00
Stock options		1364 211	529 132	835 79
Total Futures	7,566 1081	Total options - net	948 79
Gross longs ( F+ O )	9,551 1380	Net longs ( F+ O )	8,514 1160

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 8,171 crs, net long positions Rs 7,354 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	Previous week - Rs. crores	Current - Rs. crores	Change - Rs crores
Index Futures	17,137	17,043	94
Stock futures	24,367	24,528	161
Totals - a	41,504	41,571	67
Index calls	796	809	13
Stock calls	1,879	2,183	304
Totals - b	2,675	2,992	317
Index puts	559	465	94
Stock puts	512	724	212
Totals - c	1,071	1,189	118
Grand totals ( a+b+c)	45,250	45,752	502

Source - The National Stock Exchange.

PCR - Index	0.84 : 1	Previous week	0.81 : 1
PCR - Stocks	0.39 : 1	Previous week	0.33 : 1
PCR - Total	0.43 : 1	Previous week	0.36 : 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
1900 CE	76	107	31
1800 CE	94	93	01
1850 CE	65	74	09
1750 CE	50	47	03
1700 CE	36	33	03
Puts	Previous week Rs Crs	Current Rs crores	Change Rs Crs
1800 PE	102	125	23
1750 PE	73	81	08
1700 PE	76	79	03
1850 PE	35	65	30
1670 PE	18	17	01

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 33 Crs. Our inference is - watch the 1830 levels for coming week. The bears have added Rs 63 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	438	428	10
ONGC	433	463	30
Tisco	432	507	75
Telco	309	345	36
Reliance	264	320	56
Options	Previous week Rs Crs	Current Rs. Crores	Change Rs Crs
ONGC 840 calls	58	56	02
ONGC 860 calls	50	48	02
Tisco 400 calls	27	38	11
ONGC 880 calls	35	36	01
ONGC 820 calls	36	35	01

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 risen - a sign of optimism. 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.

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.

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