The markets have fallen during the week with lower traded volumes due to the restricted buying sentiments. The outstanding net long ( futures + calls - puts ) positions are up 9.20 % on a week-on-week basis. This is a routine development after expiry as the bulls build up positions. The outlook appears to be guarded as the markets are trading below their support level at the 4700 levels which points towards a possibility of 4500 - 4550 levels if persistent selling occurs. The Nifty near month futures trade at Rs 5.70 discount to cash - as against Rs 28.65 discount to cash last weekend. The basis is pointing towards a higher risk appetite even as the markets move downwards. The short selling / covering process also has an impact on the cost of carry.

Outstanding positions - week on week

Market internals - outstandings - all Rs crores

Description	Rupees crores	Call options	Put options	Net position
Index Futures	16,535 663
Stock Futures	21,616 3,275
Index Options		7,321 4,174	7,924 4,573	(-) 603 399
Stock Options		912 470	221 124	691 346
Total Futures	38,151 2,612	Total options - net	88 53
Gross longs (f+o)	46,384 7,919	Net longs (f+o)	38,239 3,222

Observation - The net out-standings have risen 9.20 % as the above table indicates. This is a routine development before expiry.

Note - Previous weekend gross long positions Rs 38,465 Crs net long positions Rs 35,017 Crs.

Source - The National Stock Exchange.

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It maybe noted that FII's now hold Rs 43,452 Crs ( up Rs 1,225 crs over the previous week ) 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 bought on Apr 04, 2008. That indicates a selling bias in the near term. FII inflows for the previous trading session in the cash segment were negative by Rs 543.00 Crs.

Source - The National Stock Exchange

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The traded volumes have been lower due to the nervous sentiments. We want the volumes and prices 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 guarded in the short term.

Description	Mar 28 - Rs. Crs	Apr 04 - Rs. Crs	Change - Rs Crs
Index Futures	1,19,314	86,864	32,450
Stock futures	1,19,074	58,437	60,637
Totals - a	2,38,388	1,45,301	93,087
Index calls	21,203	20,250	953
Stock calls	2,218	1,800	418
Totals - b	23,421	22,050	1,371
Index puts	17,915	15,764	2,151
Stock puts	521	374	147
Totals - c	18,436	16,138	2,298
Grand totals ( a+b+c)	2,80,245	1,83,489	96,756

Source - The National Stock Exchange.

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Nuts and bolts - week on week

Put call ratios

 

PCR - Index	1.12 : 1	Previous week	1.44 : 1
PCR - Stocks	0.18 : 1	Previous week	0.14 : 1
PCR - Total	0.39 : 1	Previous week	0.46 : 1

Observation - The PCR shows a tilt towards the bulls as the ratios are showing a falling position in shorts on a week-on-week basis. The Nifty PCR remaining outright bearish, the shorts have seen a covering bias on declines. The individual stocks show a rising position in shorts - indicating a selling bias even on declines. This segment is more significant to the trend determination process. The reduction in Nifty shorts was below average before expiry. This ( PCR ) will be the one of the most reliable indicator of market trends. The total PCR has remained below the equilibrium point. The equilibrium point is 0.50 : 1.

Source - The National Stock Exchange.

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Directional guidance - week on week

Market internals - Nifty put / call trends - 5 highest open interest contracts

Calls	Mar 28 - Rs. Crs	Apr 04 - Rs. Crs	Change Rs Crs
4900 CE	346	833	487
5100 CE	440	562	122
5200 CE	406	897	491
5000 CE	882	1663	781
4800 CE	724	993	269
Puts	Mar 28 - Rs. Crs	Apr 04 - Rs. Crs	Change Rs Crs
4700 PE	427	638	211
4900 PE	539	560	21
4600 PE	440	676	236
4500 PE	1116	1586	470
4800 PE	938	1009	71

Observation - The index contracts show which way the players are tilting. The outstanding positions seem to have increased in the previous week. The bulls have added Rs 2150 Crs - showing a preference for the 4800 - 5200 strikes. Our inference is - watch the 4500 - 4550 support levels in the coming days. The bears have added Rs. 1009 Crs. That shows a tendency towards the 4500 - 4700 strikes. The undertone appears guarded for now.

Source - The National Stock Exchange.

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Source - The National Stock Exchange

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The center stage - week on week

5 Highest outstanding scrips

Futures	Mar 28 - Rs. Crs	Apr 04 - Rs. Crs	Change Rs Crs
Rel Com	676	691	15
Reliance Inds	1909	1858	51
NTPC	485	470	15
ICICI Bank	585	553	32
RPL	701	802	101

Options	Mar 28 - Rs. Crs	Apr 04 - Rs. Crs	Change Rs Crs
RPL 170 calls	07	20	13
SAIL 200 calls	11	22	11
Reliance 2400 calls	15	49	34
RPL 180 calls	07	23	16
Reliance 2310 Calls	55	58	03

Observation - The action remains polarised around the same big counters - Reliance Inds & RPL. Outstanding open interest in most of the stocks has fallen - a negative phenomena after expiry. Watch Reliance for directional guidance in the coming week.

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The activity is polarised around the Nifty between the 4500 - 5300 on the long side.

 

Source - The National Stock Exchange.

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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. 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 section is for paid subscribers only

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This section 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.

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