The Derivatives Denizen.

Your one stop derivatives guide.

Sept 11, 2004

Markets rally 2 % amidst thin volumes. Bulls enhance positions.

FII outstanding long positions at 3811 crs.

The markets have risen 2 % on a week-on-week basis on flat volumes growth as the retail participants seem to have abstained largely from short term trades. The bulls continued to command the initiative as oil prices are the decline. The Outstanding net long positions are up approximately 15 % on a week-on-week basis. This is a positive development as the OI has increased in the futures segment. The outlook appears to be optimistic as the markets are above a short term resistance at the 1645 levels which if violated on a continous close basis, will see 1618 levels. The Nifty futures trade at Rs 5 discount to cash, which is due to the ex-dividend factor of select stocks. The stocks of the week are likely to be Infosys, Reliance, TCS & Tisco.

Market internals - outstandings - all Rs crores

Description	Rupees crores	Call options	Put options	Net position
Index Futures	1,827 415
Stock futures	5,176 449
Index options		520 61	581 148	(-) 61  87
Stock options		1081 242	467 157	614  85
Total Futures	7,003 864	Total options - net	553 02
Gross longs ( F+ O )	8,604 1167	Net longs ( F+ O )	7,556 862

Observation - The net out-standings have increased as the above table indicates. This is a positive development as the rise is seen in the futures segment. The options segment is witnessing higher shorts as the Nifty PCR has turned outright bearish. The bulls seem to be hedging their stock long positions by short selling the Nifty.  Click here to view previous weeks file

Note - Previous weekend gross long positions Rs 7,437 crs, net long positions Rs 6,694 crs.

Source - The National Stock Exchange.

It maybe noted that FII's now hold approximately Rs 3,811 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 Sept 09, 2004. That indicates buying in the near term. Purchases of Rs 156 crs are seen in the cash segment on that day.

Source - The National Stock Exchange.

The traded volumes have stagnated - a cautious sign as the markets have risen on poor volumes post expiry. The traded turnover was stagnant 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 cautiously optimistic in the short term. Click here to view previous weeks file

Description	Previous week - Rs. crores	Current - Rs. crores	Change - Rs crores
Index Futures	8,271	8,090	181
Stock futures	17,404	17,622	218
Totals - a	25,675	25,712	37
Index calls	1,570	1,670	100
Stock calls	692	610	82
Totals - b	2,262	2,280	18
Index puts	516	530	14
Stock puts	508	596	88
Totals - c	1,024	1,126	102
Grand totals ( a+b+c)	28,961	29,118	157

Source - The National Stock Exchange.

PCR - Index	1.14 : 1	Previous week	0.87: 1
PCR - Stocks	0.42 : 1	Previous week	0.27 : 1
PCR - Total	0.47 : 1	Previous week	0.33 : 1

Observation - The PCR shows a tilt towards the bears as the ratios are showing bearish activity building up all over on a week-on-week basis. The Nifty PCR remains outright bearish, the shorts have risen faster than the longs. 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
1650 CE	130	141	11
1600 CE	119	118	01
1670 CE	54	77	23
1620 CE	38	34	04
1630 CE	33	30	03
Puts	Previous week Rs Crs	Current Rs crores	Change Rs Crs
1600 PE	186	232	46
1550 PE	117	120	03
1650 PE	27	63	36
1500 PE	27	27	00
1630 PE	13	22	09

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 26 Crs. Our inference is - watch the 1644 support levels for the coming week. The bears have added Rs 94 Crs. That shows a tendency towards building up shorts at the 1600 strike price. 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	408	446	38
TCS	426	403	23
Reliance	407	391	16
Telco	359	376	17
SBI	323	322	01

Options	Previous week Rs Crs	Current Rs. Crores	Change Rs Crs
TCS 1000 calls	45	55	10
Tisco 260 calls	27	36	09
TCS 1100 Calls	31	33	02
Telco 400 calls	19	28	09
Satyam 370 calls	04	24	20

Observation - The action remains polarised around the same big counters - Tisco, Reliance, SBI & Telco. Outstanding open interest in most of the stocks has risen - a positive phenomena after expiry. 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 1600 - 1650 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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