The Derivatives Denizen.

Your one stop derivatives guide.

Aug 21, 2004

Markets gearing up for expiry. Bulls on back foot.

FII outstanding long positions at 3085 crs.

The markets have fallen 0.80 % lower on 10 % lower volumes as the retail participants seem to have pared their exposure this week. The bulls seemed to be on the defensive in the markets for now, oil prices are the immediate concern. The Outstanding net long positions are up approximately 6 % on a week-on-week basis. This is a marginally positive development as the OI has increased in the stock futures segment. The outlook appears to be cautious as the markets are below a support at the 1603 levels which if violated on a continous close basis, will see 1560 levels. The Nifty futures trade at Rs 4 discount to cash, which implies continued short covering by bears at higher levels, as well as selling by bulls who are paring their longs. The stocks of the week are likely to be Infosys & Wipro.

Market internals - outstandings - all Rs crores

Description	Rupees crores	Call options	Put options	Net position
Index Futures	1,517 12
Stock futures	4,340 116
Index options		553 133	444 98	109  35
Stock options		1338 191	413 68	925  123
Total Futures	5,857 104	Total options - net	1034 158
Gross longs ( F+ O )	7,748 428	Net longs ( F+ O )	6,891 262

Observation - The net out-standings have increased as the above table indicates. The fall in out-standings has been in the Nifty futures, which is a positive development as there has been bear covering. The bulls have shifted their long positions to the options segment - which shows a defensive approach. It should be noted that only 10 % of the outstanding positions have been rolled over to the September series. That shows a tendency towards squaring up rather than extending the trades. Click here to view previous weeks file

Note - Previous weekend gross long positions Rs 7,320 crs, net long positions Rs 6,629 crs.

Source - The National Stock Exchange.

It maybe noted that FII's now hold approximately Rs 3,085 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 Aug 19, 2004. That indicates selling in the near term.

Source - The National Stock Exchange.

The traded volumes have fallen - a marginally positive sign as the markets have fallen on lower volumes amidst a profit taking phase. 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	14,863	13,688	1,175
Stock futures	23,425	20,259	3,166
Totals - a	38,288	33,947	4,341
Index calls	1,037	1,097	60
Stock calls	2,028	1,866	162
Totals - b	3,065	2,963	102
Index puts	775	839	64
Stock puts	583	601	18
Totals - c	1,358	1,440	82
Grand totals ( a+b+c)	42,711	38,350	4,361

Source - The National Stock Exchange.

PCR - Index	0.82 : 1	Previous week	0.85: 1
PCR - Stocks	0.30 : 1	Previous week	0.29 : 1
PCR - Total	0.33 : 1	Previous week	0.32 : 1

Observation - The PCR shows a tilt towards the bears as the ratios are showing bull unloading in stocks and squaring up of short positions on a week-on-week basis on the Nifty. The Nifty PCR remains outright bearish, the shorts have risen slower than the longs. This implies that the bears are unwilling to enhance their positions. 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	98	136	38
1650 CE	87	89	02
1640 CE	45	42	03
1620 CE	32	44	12
1600 CE (Sept)	03	30	27
Puts	Previous week Rs Crs	Current Rs crores	Change Rs Crs
1600 PE	119	119	00
1550 PE	72	84	12
1500 PE	43	45	02
1550 PE (Sept)	07	41	34
1580 PE	09	20	11

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 76 Crs. Our inference is - watch the 1580 support levels for the coming week. The bears have added Rs 59 Crs. That shows a tendency towards squaring up shorts at lower prices. The undertone appears cautious 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
Tisco	482	491	09
Telco	370	365	05
Reliance	357	387	30
SBI	273	271	02
Infosys	213	257	44

Options	Previous week Rs Crs	Current Rs. Crores	Change Rs Crs
Tisco 266.65 calls	41	44	03
Tisco 273.35 Calls	39	36	03
Tisco 280 calls	37	42	05
Reliance 500 calls	37	39	02
Satyam 350 calls	27	30	03

Observation - The action remains polarised around the same big counters - Tisco, Reliance, SBI & Infosys. Outstanding open interest in most of the stocks has risen - a positive phenomena. 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 2 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.

The index implied volatility is on the descent which shows a the markets are moving higher with relative ease.

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.