The Derivatives Denizen.

Your one stop derivatives guide.

May 22, 2004

Markets sink lower. Volatility sky rockets.

Outstanding long positions plummet ahead of expiry.

The markets have crashed on a week-on-week basis as the bulls pared positions at all levels especially after the big fall on Monday. The Outstanding net long positions are down approximately 20 % on a week-on-week basis. This is a negative development as the bulls show a lack of conviction even at lower levels. The traded volumes were 32 % lower. The outlook appears cautious as the markets are seeking a clear sense of direction. The 1350 - 1400 supports are a crucial level to watch for now.

Market internals - outstandings - all Rs crores

Description	Rupees crores	Call options	Put options	Net position
Index Futures	1,792 646
Stock futures	3,212 796
Index options		1257 45	390 25	867 20
Stock options		1525 08	270 51	1255 43
Total Futures	5,004 1442	Total options - net	2122 63
Gross longs ( F+ O )	7,786 1405	Net longs ( F+ O )	7,126 1379

Observation - The out-standings have decreased as the above table indicates. The rise in outstandings has come from the options segment and that too more because of squaring up of shorts rather than a big buildup of longs. The futures show a big fall in outstanding positions. The coming days will continue to be governed by news driven considerations. Click here to view previous weeks file

Note - Previous weekend gross long positions Rs 9,191 crs, net long positions Rs 8,505 crs.

Source - The National Stock Exchange.

The traded volumes have crashed - a negative sign as the retail segment has shown signs of withdrawal. The traded turnover was lower all round. 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.

Description	Previous week - Rs. crores	Current - Rs. crores	Change - Rs crores
Index Futures	24,148	17,794	6,354
Stock futures	25,654	17,058	8,596
Totals -	49,802	34,852	14,950
Index calls	2,682	1,006	1,676
Stock calls	2,405	1,347	1,058
Totals - b	5,087	2,353	2,734
Index puts	1,178	704	474
Stock puts	635	623	12
Totals - c	1,813	1,327	486
Grand totals ( a+b+c)	56,702	38,532	18,170

Source - The National Stock Exchange.

PCR - Index	0.33 : 1	Previous week	0.31: 1
PCR - Stocks	0.20 : 1	Previous week	0.22 : 1
PCR - Total	0.21 : 1	Previous week	0.23 : 1

Observation - The PCR shows a tilt towards the bulls as the ratios are showing higher long positions on a week-on-week basis. The Nifty PCR has turned outright bullish, the longs have risen faster than the shorts. 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
1800 CE	227	205	22
1900 CE	175	165	10
1700 CE	190	162	28
1750 CE	119	98	21
1850 CE	102	93	09
Puts	Previous week Rs Crs	Current Rs crores	Change Rs Crs
1670 PE	74	59	15
1700 PE	71	47	24
1500 PE	n/a last week	44
1800 PE	47	35	12
1750 PE	44	27	17

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 90 Crs. Our inference is - watch the 1350 - 1400 levels for coming week. The bears have reduced Rs 68 Crs. That shows a tendency towards squaring up shorts at lower levels. The undertone appears cautious 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	428	373	55
Reliance	535	370	165
Telco	264	199	65
Infosys	225	174	51
SBI	160	128	32
Options	Previous week Rs Crs	Current Rs. Crores	Change Rs Crs
RIL 540 calls	54	47	07
ONGC 860 calls	47	45	02
RIL 560 calls	35	31	04
SBI 660 calls	33	31	02
RIL 520 calls	33	30	03

Observation - The action remains polarised around the same big counters - Tisco, Reliance, SBI & Telco. Outstanding open interest in most of the stocks has fallen - a sign of caution. Watch Reliance 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 1500 - 1700 on the long side and Reliance, L&T & 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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