The Derivatives Denizen

Your one stop derivatives guide.

Feb 14, 2004

Markets surge with volumes.

Bulls regain hold on sentiments. Higher outstandings imbibe hope.

The markets have shown a rebound and the same has been accompanied by higher outstanding and volumes. That is a heartening sign. Marrying technicals with F&O indicators, one can see that the worst is over in the short term. Our investors will recollect that we had advocated on Thursday morning that the markets were appearing positive and a bullishness was being seen in the undertone. Derivatives indicators are pointing towards a bullishness in the initial part of the week and should the bull positions accelerate, the outlook may change for the better in the intermediate term. It is important that the bulls continue to lend support at all levels, or else, the markets are likely to take a tumble without a warning. Caution is advocated in the coming week.

Market internals - outstandings

Observation - The outstanding long positions are rising slowly as can be observed from the above table. The fact that the futures shows higher outstandings signals marginal optimism as bulls have preferred to enhance commitments. The increase in open interest has come from futures & options - a positive indicator. Click here to view previous weeks file

Note - Previous gross long positions Rs 7,643 crs, net long positions Rs 7,163 crs - positions are on a week-on-week basis

Source - The National Stock Exchange

Observation - The PCR shows a tilt towards the bears as the ratios are showing higher outstanding short positions on a week-on-week basis. The total PCR still remains positive. The equilibrium point is 0.50 : 1. The Nifty continues to take the brunt of the bearish positions. Click here to view previous weeks file. Positions are on a week-on-week basis

Source - The National Stock Exchange

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

Observation - The index contracts show which way the players are tilting. The bulls have added only 35 crores in outstanding long positions in the top 5 strike prices, whereas the bears have added 111 crores in outstanding shorts. What is interesting to note is that the highest increase in bearish positions is at out of the money strike prices, which signals an optimism amongst the bears that the markets would weaken. Positions are on a week-on-week basis

Most actively traded contracts - Calls

Most actively traded contracts - Puts

Observation - An analysis of the most active contracts traded throws up an interesting observation - the bears are shifting their focus to attack the Nifty at 1900 & 1850 puts. The bulls are also concentrating on the 1900 Nifty strike. Technicals show a short term trend determination at the 1909 - 1918 band. Should the Nifty stay above this band, the bulls will prevail with strength. The 1800 strike for the puts is now at # 3 position. Click here to view previous weeks file Positions are on a week-on-week basis

Source - The National Stock Exchange

5 Highest outstanding scrips

Observation - The action remains polarised around the big four, however, Ranbaxy continues to remain the odd man out. Reliance, Telco and Tisco are likely to lead the markets from the front in the coming weeks. It maybe noted that the highest increase in long positions in the options segment has come in Reliance. The retail segment is placing their bets on Reliance, whereas the operators are betting on Tisco. Click here to view previous weeks file. Positions are on a week-on-week basis

 

Source - The National Stock Exchange

Higher implied volatility is used by swing / momentum traders to guage the fluctuation that a counter is likely to provide in either direction. If a trade is initiated in the right direction ( buy / sell ) at the right time & strike price, these trades result in superlative returns.

Observation - Our investors are advised to watch the above highly volatile counters for signs of a bounceback. However, other factors too need to be taken into account before a fresh trade is initiated. Arvind Mills has jumped on Friday - it has been a regular feature in this section since we introduced this newsletter.

 

Source - The National Stock Exchange

Changes in outstanding futures positions.

Stars of the day

Stock	Open interest	Stock price	Outlook
Tata Motors	Up	Price	Bullish
Tisco	Up	Price	Bullish

 

Note - +++ signifies higher open interest in the February, March & April series simultaneously. Click here to view previous weeks file

 

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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