Technical Picks | June 29, 2013

Gas Fired equities, will the fizz last?

Sensex (19396) / Nifty (5842)
The week commenced on a pessimistic note considering weak global cues. During the first half of the week, the bears made several attempt to break the weekly '89-EMA' level of 18456 / 5585 5585. However, as expected and mentioned, this average played a sheet anchor role for the bulls and the indices did not close below 18456 / 5585 even for a single session. The last 2 sessions were simply nightmare for the bears as indices soared more than 4% to post a weekly high of 19433 / 5853. 5853 This was mainly on account of the natural gas price hike by the Cabinet Committee for Economic Affairs' (CCEA). As a result, the Oil & Gas sector contributed heavily in this week's rally along with the IT and Banking sectors; whereas the Consumer Durables and FMCG counters ended on a pessimistic note. The Sensex and the Nifty ended with mammoth gain of 3.31% and 3.08%, respectively, over the previous week's closing.
Source: Falcon

Exhibit 1: Nifty weekly chart

Exhibit 2: Nifty Daily chart

Pattern formation:

The '89-day EMA' and the '89-Week EMA' are placed at 19318 / 5850 and 18477/ 5592 levels, respectively. The '20-Day EMA' and the '20-Week EMA' are placed at 19128 / 5779 and 19312 / 5850 5850, respectively. The daily 'RSI-Smoothened' oscillator, the 'ADX (9) indicator and '3 & 8 EMA' are now signaling a positive crossover. The 50% and 61.8% Fibonacci retracement levels of the fall from 20444 / 6229 to 18467/ 5566 are placed at 19455/ 5898 and 19689 / 5976 5976, respectively.
Source: Falcon

'89-EMA' and bounced back very sharply to surprise the bears. Last week, we had mentioned the negative placement of few technical evidences, which eventually failed to show their impact as the bears could not mark their stand below 18456 / 5585 on closing basis. The weekly chart now depicts a 'Bullish Engulfing' Pattern. An occurrence of such pattern near important support level signifies that the existing downtrend has halted. In Nifty, the said pattern would be confirmed above last week's high of 5864 (the Sensex has already crossed last week's high). Considering the positive crossover in daily 'RSI-Smoothened' oscillator, the ADX (9)' indicator and the '3 & 8 EMA', we expect our benchmark indices to rally in the coming week if they sustain 5864 In this scenario, it may move towards above 19433 / 5864. 19455/ 5898) 5898 and 61.8% (19689 19689 / 5976 the 50% (19455/ 5976) Fibonacci retracement levels of the fall from 20444 / 6229 to 18467/ 5566 5566. On the flipside, 19093 - 18926 / 5749 - 5700 levels would act as key support levels in the coming week.

The weekly chart now depicts a 'Bullish Engulfing' but the monthly chart shows a 'Bearish Engulfing" Japanese candlestick pattern.

Future Outlook
It was a complete roller coaster ride for the market participants as indices bounced sharply from weekly lows post the domestic event. It has been observed in the past (weekly bottom on September 08, 2012 and April 12, 2013) also that the weekly '89-EMA' acts as a strong support for our benchmark indices. Similarly, as expected, this week too indices fell to sustain below

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Technical Picks | June 29, 2013

Weekly Pivot Levels For Nifty 50 Stocks

SCRIPS
SENSEX NIFTY BANKNIFTY ACC AMBUJACEM ASIANPAINT AXISBANK BAJAJ-AUTO BANKBARODA BHARTIARTL BHEL BPCL CAIRN CIPLA COALINDIA DLF DRREDDY GAIL GRASIM HCLTECH HDFC HDFCBANK HEROMOTOCO HINDALCO HINDUNILVR ICICIBANK IDFC INDUSINDBK INFY ITC JINDALSTEL JPASSOCIAT KOTAKBANK LT LUPIN M&M MARUTI NMDC NTPC ONGC PNB POWERGRID RANBAXY RELIANCE RELINFRA SBIN SESAGOA SUNPHARMA TATAMOTORS TATAPOWER TATASTEEL TCS ULTRACEMCO R2 20,064 6,041 12,056 1,284 195 4,949 1,412 2,057 606 309 184 391 315 407 324 196 2,331 344 2,871 829 936 707 1,759 106 597 1,111 142 496 2,613 341 236 61 755 1,459 824 1,022 1,607 111 151 384 684 119 365 933 374 2,039 153 1,068 302 92 284 1,618 1,986 R1 19,730 5,941 11,837 1,253 191 4,793 1,369 1,991 590 300 179 379 302 400 313 189 2,275 328 2,815 802 907 688 1,711 103 591 1,091 135 482 2,556 333 227 57 738 1,434 803 996 1,572 108 147 357 668 115 337 898 361 1,997 148 1,040 292 89 279 1,568 1,931 PIV OT PIVO 19,099 5,754 11,435 1,200 184 4,544 1,288 1,873 566 288 170 357 288 386 299 175 2,178 302 2,764 774 858 654 1,637 98 586 1,056 130 465 2,451 322 211 53 711 1,384 779 950 1,537 104 142 327 650 108 319 838 340 1,944 140 988 277 84 270 1,474 1,846 S1 18,764 5,655 11,216 1,169 180 4,388 1,245 1,807 549 280 166 345 275 378 289 167 2,121 287 2,709 747 830 635 1,589 95 580 1,036 123 451 2,393 314 201 49 694 1,359 757 924 1,503 101 139 300 634 105 291 803 328 1,902 135 960 267 81 265 1,424 1,791 S2 18,133 5,467 10,814 1,116 173 4,139 1,164 1,690 525 268 157 323 260 365 275 154 2,024 261 2,658 719 781 601 1,516 90 575 1,001 117 435 2,288 303 185 45 667 1,309 733 878 1,468 96 134 270 616 98 274 744 306 1,849 127 908 253 77 256 1,331 1,706

Technical Research Team

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Derivatives Review | June 29, 2013

Though FIIs buying, IVs may still rise

Nifty spot closed at 5824.20 this week, against a close of 5667.65 last week. The Put-Call Ratio has increased from 0.89 to 1.15 levels and the annualized Cost of Carry is negative 0.17% 0.17%. The Open Interest of Nifty Futures decreased by 37.71% 37.71%.

Put-Call Ratio Analysis

PCR-OI has increased from 0.89 to 1.15 levels. In the new expiry we have seen good amount of buildup in 5800-6100 call option, while in put option 5200-5800 strike has seen considerable amount of buildup in open interest on week-onweek basis. Highest buildup in this series is in 5600 put option, while in call option the buildup is quite scattered however maximum open positions as of now is in 6000 strike price.

Implied Volatility Analysis

Implied Volatility (IV) for NIFTY has decreased from 17.39%.to 16.59%. Historical volatility (HV) is at 25.38% and that for BANKNIFTY is trading at 32.59%. Liquid counters having very high HV are OPTOCIRCUI, APOLLOTYRE, IFCI, JPPOWER and RENUKA. Stocks where HV are on lower side are GRASIM, CIPLA, BIOCON, ITC, and ACC.

Open Interest Analysis

Total open interest of market has decreased from `1,62,582/cr. to `1,03,749/- cr. Stock futures open interest has decreased from `31,863/-cr. to `25,240/- cr. Some of the liquid counters which added open interest are JSWENERGY, TECHM, ARVIND, IDFC and ALBK. Open interest was shed in large cap names like ITC, ASIANPAINT, ACC, HDFCBANK and RELIANCE.

Cost-of-Carry Analysis
Nifty futures closed at a discount of 0.75 points against the premium of 11.00 points to its spot. Next month future is trading with premium of 18.95 points. Liquid counters where CoC is high are SIEMENS, SRTRANSFIN, IGL, OPTOCIRCUI and UNITECH. Stocks with negative CoC are ANDHRABANK, JSWENERGY, HINDUNILVR, CANBK and TATASTEEL.

Derivative Strategy
Scrip : T ATAMO TORS TA AMOT View: Mildly Bearish Buy/Sell BUY SELL SELL
BEP - `249 Max. Risk: Unlimited
If TATAMOTORS continues to move below BEP .

CMP : `282.70

Lot Size : 1000

Exercise Date (F & O) : 25th. July 2013 Expected Payoff

Closing P rice Price (`) Expected oss rofit/Loss Profit/L

Strategy: Long Put Ladder Scrip TATAMOTORS TATAMOTORS TATAMOTORS Strike Price 280 270 260 Series JUL JUL JUL Option Type PE PE PE Buy/Sell Rate (`) 10.00 7.00 4.00

Qty 1000 1000 1000

230 240 250 260

(`19.00) (`9.00) `1.00 `11.00 `11.00 `1.00

Max. P rofit: `11000 Profit:

If TATAMOTORS closes on or between 260-270 on expiry.

270 280

NO TE : Profit can be booked before expiry if TATAMOTORS moves in favorable direction and time value decays. NOTE TE:

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Ratings (Returns) :

Buy (> 15%) Reduce (-5% to -15%)

Accumulate (5% to 15%) Sell (< -15%)

Neutral (-5 to 5%)

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