The Derivatives Denizen.

Your one stop derivatives guide.

Sept 26, 2004

Markets fall 0.5 % amidst higher volumes. Countdown to expiry begins.

FII outstanding long positions at 4,624 crs.

The markets have fallen over 0.5 % on a week-on-week basis on high volumes growth as the operators seem to have offloaded long positions at higher levels. The bears continued to press sales at higher levels selectively. The Outstanding net long positions are up approximately 0.5 % on a week-on-week basis. This is a positive development as the OI has increased even ahead of expiry. The outlook appears to be cautious 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 Re 1 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	2,111 08
Stock futures	5,660 90
Index options		724 145	974 144	(-) 250  01
Stock options		1491 261	741 116	750  145
Total Futures	7,771 98	Total options - net	500 146
Gross longs ( F+ O )	9,986 308	Net longs ( F+ O )	8,271 48

Observation - The net out-standings have increased as the above table indicates. This is a positive development as the rise is seen even ahead of expiry. Hwever, the rise has come in the options segment, which shows a defensive approach. 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 9,678 crs, net long positions Rs 8,223 crs.

Source - The National Stock Exchange.

It maybe noted that FII's now hold approximately Rs 4,624 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 sold more futures than they have bought on Sept 23, 2004. That indicates selling in the near term. Sales of Rs 147 crs are seen in the cash segment on that day.

Source - The National Stock Exchange.

The traded volumes have jumped - a bearish sign as the markets have fallen on higher volumes. The traded turnover was higher 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	9,548	14,031	4,483
Stock futures	23,393	28,643	5,250
Totals - a	32,941	42,674	9,733
Index calls	874	1,104	230
Stock calls	2,718	2,924	206
Totals - b	3,592	4,028	436
Index puts	758	822	64
Stock puts	945	817	128
Totals - c	1,703	1,639	64
Grand totals ( a+b+c)	38,236	48,341	10,105

Source - The National Stock Exchange.

PCR - Index	1.37 : 1	Previous week	1.46: 1
PCR - Stocks	0.49 : 1	Previous week	0.48 : 1
PCR - Total	0.56 : 1	Previous week	0.55 : 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 though remaining outright bearish, the shorts have risen slower than the longs. The bears have covered a small portion of their outstanding positions ahead of expiry This ( PCR ) will be the one of the most reliable indicator of market trends. The total PCR has remained  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	121	97	24
1600 CE	100	86	14
1700 CE ( oct )	18	55	37
1700 CE	32	51	19
1750 CE	00	72	72
Puts	Previous week Rs Crs	Current Rs crores	Change Rs Crs
1600 PE	238	227	11
1550 PE	120	117	03
1650 PE	103	92	11
1700 PE	53	70	17
1730 PE	13	44	31

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 128 Crs. Our inference is - watch the 1712 support levels in the coming days. The bears have added Rs 23 Crs. That shows a tendency towards building up shorts at the 1700 - 1730 strike price. The undertone appears cautious 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	493	467	26
TCS	436	499	63
Reliance	402	331	71
Telco	408	340	68
SBI	332	323	09

Options	Previous week Rs Crs	Current Rs. Crores	Change Rs Crs
TCS 1000 calls	43	31	12
TCS 1040 calls	27	36	09
Reliance 500 Calls	18	35	17
Tisco 290 calls	08	35	27
Satyam 380 calls	32	41	09

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 routine phenomena before 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 1700 - 1750 on the long side and Satyam Computers, Tata Motors, Reliance & Tisco in individual stocks.

 

Source - The National Stock Exchange.

Volatility is a F&O traders best friend. We have split the volatility readings of the stocks in two segments - above the market average and below the market average. It is obvious that higher than average volatility will see a larger move in either direction and therefore benefit a savvy intraday / short term trader. Please note how the volatility has fallen sharply across the board since the last 4 months. It will have an impact on the margins payable by futures traders. It is wiser to avoid those stocks which show lower volatility readings if you want short term profits. Keep watching this space for regular updates.

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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