The Derivatives Denizen.

Your one stop derivatives guide .

April 25, 2004

Markets consolidate gains. Volumes jump sharply.

Outstanding long positions improve before expiry.

The markets have risen by approximately 1.5 % on a week-on-week basis as the bears pared positions at higher levels. The bulls have started increasing their exposure as the sentiments improved. The Outstanding net long positions are up approximately 6 % on a week-on-week basis. This is an encouraging phenomena as the bulls are getting bolder by the week. The traded volumes were 20 % higher. The outlook appears improved as the markets clearly seek supports at 1830 levels. The support levels of below 1850 have been established as a strong base 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	1,733 68
Stock futures	6,306 405
Index options		684 63	631 123	53 60
Stock options		1457 93	642 113	815 20
Total Futures	8,039 473	Total options - net	868 80
Gross longs ( F+ O )	10,180 629	Net longs ( F+ O )	8,907 393

Observation - The outstandings have increased as the above table indicates. The noteworthy aspect is the rise in the futures segment even as the options interest is lower. This development shows a hedging of stock longs with Nifty shorts. The coming days will be governed by expiry considerations. Click here to view previous weeks file

Note - Previous weekend gross long positions Rs 9,551 crs, net long positions Rs 8,514 crs.

Source - The National Stock Exchange.

The traded volumes have risen sharply - a very positive indicator. The gains are seen concentrated 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 as the table below indicates.

Description	Previous week - Rs. crores	Current - Rs. crores	Change - Rs crores
Index Futures	17,043	18,985	1,942
Stock futures	24,528	31,084	6,556
Totals - a	41,571	50,069	8,498
Index calls	809	1,111	302
Stock calls	2,183	2,584	401
Totals - b	2,992	3,695	703
Index puts	465	678	213
Stock puts	724	663	61
Totals - c	1,189	1,341	152
Grand totals ( a+b+c)	45,752	55,105	9,353

Source - The National Stock Exchange.

PCR - Index	0.95 : 1	Previous week	0.84 : 1
PCR - Stocks	0.48 : 1	Previous week	0.39 : 1
PCR - Total	0.52 : 1	Previous week	0.43 : 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 shorts are now almost as high as the longs. The bulls seem to have concentrated on individual stocks, though the stocks are also showing higher puts. The total PCR has also turned negative. The equilibrium point is 0.50 : 1. Our investors will recall that the trend has been persisting since 3 weeks. Longs in futures are being hedged with shorts in options. 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	107	109	02
1850 CE	74	74	00
1800 CE	93	73	20
1750 CE	47	41	06
1940 CE	28	33	05
Puts	Previous week Rs Crs	Current Rs crores	Change Rs Crs
1800 PE	125	147	22
1850 PE	65	90	25
1750 PE	81	80	01
1700 PE	79	76	03
1900 PE	12	25	13

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 reduced Rs 19 Crs. Our inference is - watch the 1850 levels for coming week. The bears have added Rs 56 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
Tisco	507	634	127
ONGC	463	455	08
SBI	428	453	25
Reliance	320	376	56
Telco	345	357	12
Options	Previous week Rs Crs	Current Rs. Crores	Change Rs Crs
ONGC 840 calls	56	56	00
ONGC 860 calls	48	51	03
ONGC 880 calls	36	37	01
ONGC 820 calls	35	34	01
ONGC 900 calls	31	32	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 ICICI Bank, Satyam Computers, Tisco & GAIL in individual stocks.

 

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.

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