The Derivatives Denizen.

Your one stop derivatives guide.

Sept 18, 2004

Markets rally 3.5 % amidst higher volumes. Bulls back in charge.

FII outstanding long positions at 4,400 crs.

The markets have risen over 3.5 % on a week-on-week basis on high volumes growth as the retail participants seem to have participated somewhat in the trading. The bulls continued to command the initiative as oil prices are the decline. The Outstanding net long positions are up approximately 11 % 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 1714 levels which if violated on a continous close basis, will see 1688 levels. The Nifty futures trade at Rs 4 discount to cash. The stocks of the week are likely to be Reliance, TCS & Tisco.

Market internals - outstandings - all Rs crores

Description	Rupees crores	Call options	Put options	Net position
Index Futures	2,119 292
Stock futures	5,750 574
Index options		579 59	830 249	(-) 251  190
Stock options		1230 149	625 158	605  09
Total Futures	7,869 864	Total options - net	354 199
Gross longs ( F+ O )	9,678 1074	Net longs ( F+ O )	8,223 667

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 8,604 crs, net long positions Rs 7,556 crs.

Source - The National Stock Exchange.

It maybe noted that FII's now hold approximately Rs 4,427 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 16, 2004. That indicates buying in the near term. Purchases of Rs 148 crs are seen in the cash segment on that day.

Source - The National Stock Exchange.

The traded volumes have jumped - a bullish sign as the markets have risen on higher volumes. The traded turnover was higher in 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	8,090	9,548	1,458
Stock futures	17,622	23,393	5,771
Totals - a	25,712	32,941	7,229
Index calls	610	874	264
Stock calls	1,670	2,718	1,048
Totals - b	2,280	3,592	1,312
Index puts	530	758	228
Stock puts	596	945	349
Totals - c	1,126	1,703	577
Grand totals ( a+b+c)	29,118	38,236	9,118

Source - The National Stock Exchange.

PCR - Index	1.46 : 1	Previous week	1.14: 1
PCR - Stocks	0.48 : 1	Previous week	0.42 : 1
PCR - Total	0.55 : 1	Previous week	0.47 : 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 turned  negative too. 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	141	121	20
1600 CE	118	100	18
1670 CE	77	67	10
1700 CE	00	32	32
1630 CE	30	28	02
Puts	Previous week Rs Crs	Current Rs crores	Change Rs Crs
1600 PE	232	238	06
1550 PE	120	120	00
1650 PE	63	103	40
1700 PE	00	53	53
1670 PE	15	47	32

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 reduced Rs 18 Crs. Our inference is - watch the 1714 support levels for the coming week. The bears have added Rs 131 Crs. That shows a tendency towards building up shorts at the 1600 strike price. The undertone appears 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	446	493	43
TCS	403	436	33
Reliance	391	402	11
Telco	376	408	32
SBI	322	332	10

Options	Previous week Rs Crs	Current Rs. Crores	Change Rs Crs
TCS 1000 calls	55	43	12
TCS 1020 calls	23	33	10
TCS 1100 Calls	33	32	01
Tisco 270 calls	22	27	05
Satyam 380 calls	20	32	12

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 1650 - 1700 on the long side and Satyam Computers, Tata Motors, 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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