The Derivatives Denizen.

Your one stop derivatives guide.

July 10, 2004

Markets at thresholds again.

FII outstanding long positions steady at 2950 crs.

The markets have risen by 1.5 % on 08 % lower volumes as the retail participants seem to have abstained this week. The bulls are trying to tighten their grip on the markets, and the results will be clear by Wednesday when the turnover tax issue will be clarified. The Outstanding net long positions are down approximately 03 % on a week-on-week basis. This is a negative development as the fall is even after a rally in prices. The outlook appears cautiously optimistic as the markets are above a support base at the 1510 levels which if violated, will see 1480 levels. The Nifty futures continue to trade at a discount to cash of Rs 16, which implies continued short selling by bears at higher levels, as well as by bulls who are hedging their stock longs.

Market internals - outstandings - all Rs crores

Description	Rupees crores	Call options	Put options	Net position
Index Futures	1,550 107
Stock futures	2,966 139
Index options		694 204	519 346	175 142
Stock options		660 189	272 84	388 105
Total Futures	4,516 32	Total options - net	563 37
Gross longs ( F+ O )	5,870 361	Net longs ( F+ O )	5,079 144

Observation - The net out-standings have decreased as the above table indicates. The rise in out-standings has been in the Nifty futures and stock calls, which is a marginally negative development. Click here to view previous weeks file

Note - Previous weekend gross long positions Rs 5,509 crs, net long positions Rs 5,223 crs.

Source - The National Stock Exchange.

It maybe noted that FII's now hold approximately Rs 2,950 crs in open interest which is a substantial portion of the entire market open interest. Though this means that FII's are unlikely to unwind this exposure totally, the fact is, the markets are completely FII dependent as of now. This shallowness in the markets will make the rallies / falls very sharp due to a low outstandings base. 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 sold more futures than they have bought on July 08, 2004. That indicates selling in the near term. Purchases are seen in the cash segment, which shows a bias towards hedging of positions in the short term. We advocate monitoring these figures carefully.

Source - The National Stock Exchange.

The traded volumes have fallen - a negative sign as the markets have risen on lower volumes amidst a pullback. The traded turnover was lower in the futures segment. We expect this trend to continue in the coming week. The combination of traded volumes, open interest and market breadth are a reliable indicator of the undercurrents. The outlook appears brittle in the short term. Click here to view previous weeks file

Description	Previous week - Rs. crores	Current - Rs. crores	Change - Rs crores
Index Futures	13,880	13,108	772
Stock futures	20,350	16,854	3,496
Totals - a	34,230	29,962	4,268
Index calls	1,239	1,923	684
Stock calls	1,261	1,811	550
Totals - b	2,500	3,734	1,234
Index puts	736	1,310	574
Stock puts	362	608	246
Totals - c	1,098	1,918	820
Grand totals ( a+b+c)	37,828	35,614	2,214

Source - The National Stock Exchange.

PCR - Index	0.78 : 1	Previous week	0.71: 1
PCR - Stocks	0.37 : 1	Previous week	0.34 : 1
PCR - Total	0.42 : 1	Previous week	0.39 : 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 seen some short selling, and remains outright bearish, the shorts have risen faster than the longs. This implies that the bears are unwilling to surrender their positions. This ( PCR ) will be the one of the most reliable indicator of market trends. The total PCR has remained above the optimal point. 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
1500 CE	136	143	07
1550 CE	103	138	35
1600 CE	79	121	42
1450 CE	44	45	01
1650 CE	21	80	59
Puts	Previous week Rs Crs	Current Rs crores	Change Rs Crs
1500 PE	112	162	50
1450 PE	100	136	36
1400 PE	42	56	14
1370 PE	21	26	05
1550 PE	13	56	43

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 144 Crs. Our inference is - watch the 1510 support levels for the coming week. The bears have added Rs 148 Crs. That shows a tendency towards adding  shorts at lower strike prices. The undertone appears cautiously optimistic 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
Reliance	262	236	26
Infosys	239	215	24
Tisco	224	212	12
Telco	212	158	54
SBI	192	163	29

Options	Previous week Rs Crs	Current Rs. Crores	Change Rs Crs
Tisco 300 calls	15	20	05
RIL 440 Calls	14	22	08
Satyam 320 calls	10	16	06
SBI 440 calls	08	16	08
RIL 450 calls	08	15	07

Observation - The action remains polarised around the same big counters - Tisco, Reliance, SBI & Telco. Outstanding open interest in all the stocks has fallen - a negative phenomena as it shows unloading. Watch Reliance for directional guidance in the coming week, as we have been emphasising since a fortnight. 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 1450 - 1550 on the long side and Satyam Computers, Reliance & Tisco in individual stocks.

 

Source - The National Stock Exchange.

This segment is for paid subscribers only.

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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