The Derivatives Denizen.

Your one stop derivatives guide.

July 24, 2004

Markets attempting to rally against the odds.

FII outstanding long positions at 3300 crs.

The markets have risen on 20 % higher volumes as the retail participants seem to have returned this week. The bulls have managed to tighten their grip on the markets for now, and the monsoons remain the only hurdle. The Outstanding net long positions are up approximately 12 % on a week-on-week basis. This is a positive development as the OI has risen in the futures segment. The outlook appears cautiously optimistic as the markets are below a resistance at the 1630 levels which if surpassed, will see 1660 levels. The Nifty futures continue to trade at a discount to cash of Rs 6, which implies continued short selling by bears at higher levels, as well as by bulls who are hedging their stock longs. The stock of the week is likely to be Tisco.

Market internals - outstandings - all Rs crores

Description	Rupees crores	Call options	Put options	Net position
Index Futures	1,990 302
Stock futures	3,875 458
Index options		781 06	707 110	74 104
Stock options		898 126	523 123	375 03
Total Futures	5,865 760	Total options - net	449 101
Gross longs ( F+ O )	7,544 880	Net longs ( F+ O )	6,314 647

Observation - The net out-standings have increased as the above table indicates. The rise in out-standings has been in the Nifty futures and stock futures, which is a positive development. Note how the Nifty futures are down in the options segment due to accumulating short build-up. Click here to view previous weeks file

Note - Previous weekend gross long positions Rs 6,664 crs, net long positions Rs 5,667 crs.

Source - The National Stock Exchange.

It maybe noted that FII's now hold approximately Rs 3,300 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 largely 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 22, 2004. That indicates selling in the near term. purchases of Rs 64 crs are seen in the cash segment on that day, 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 risen - a positive sign as the markets have risen on higher volumes amidst a pullback. The traded turnover was higher in the futures segment. We want this trend to continue in the coming week if the markets are to sustain an upmove. The combination of traded volumes, open interest and market breadth are a reliable indicator of the undercurrents. The outlook appears improved in the short term. Click here to view previous weeks file

Description	Previous week - Rs. crores	Current - Rs. crores	Change - Rs crores
Index Futures	10,292	12,126	1,834
Stock futures	16,148	20,116	3,968
Totals - a	26,440	32,242	5,802
Index calls	944	1,296	352
Stock calls	1,324	1,856	532
Totals - b	2,268	3,152	884
Index puts	737	736	01
Stock puts	535	685	150
Totals - c	1,272	1,421	149
Grand totals ( a+b+c)	29,980	36,815	6,835

Source - The National Stock Exchange.

PCR - Index	0.94 : 1	Previous week	0.79: 1
PCR - Stocks	0.53 : 1	Previous week	0.47 : 1
PCR - Total	0.58 : 1	Previous week	0.52 : 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 more 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 turned negative. 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	126	153	27
1550 CE	168	152	16
1500 CE	189	142	47
1650 CE	72	50	22
1700 CE	37	36	01
Puts	Previous week Rs Crs	Current Rs crores	Change Rs Crs
1500 PE	174	177	03
1550 PE	83	128	45
1450 PE	124	122	02
1400 PE	58	56	02
1520 PE	53	52	01

Observation - The index contracts show which way the players are tilting. The outstanding positions seem to have decreased all round in the previous week. The bulls have reduced Rs 59 Crs. Our inference is - watch the 1550 support levels for the coming week. The bears have added Rs 43 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
Tisco	281	455	174
Reliance	315	328	13
Infosys	251	223	28
SBI	180	223	43
ONGC	156	190	34

Options	Previous week Rs Crs	Current Rs. Crores	Change Rs Crs
Satyam 330 calls	20	23	03
Tisco 370 Calls	01	21	20
Telco 400 calls	14	17	03
Satyam 340 calls	10	16	06
Tisco 350 calls	07	16	09

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 as it shows accumulation. Watch Reliance for directional guidance in the coming week, as we have been emphasising since 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 1500 - 1600 on the long side and Satyam Computers, Reliance & Tisco 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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