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Volume 5 : Issue 46
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Italy to IIP
Silvio Berlusconi became the rst major casualty of the Euro crisis. As Italy continued to deteriorate, Mr. Berlusconi not only faced signicant pressure from European allies and investors, but he also found himself entrapped in a ood of personal scandals, making his tenure increasingly untenable. Forced to resign over the weekend, Italy is now putting into place an interim technical government, largely comprising non-politicians, led by former European commissioner, Mario Monti. Investors cheered at the announcement, with Italys stock markets reacting positively while 10-year bond yields declined 100 bps to below 7% levels. Mr. Monti has to oversee effective implementation of the austerity measures passed by Mr. Berlusconi. However, with cracks already appearing in certain parts of the Italian political spectrum, he is certainly going to nd the task cut out for him. Meanwhile, another interim government saw the light of day in embattled Greece. There are hopes riding on Lucas Papademos, another technocrat and former VP of the ECB, both within and without Greece. The nation has put in place a broader unity administration, including George Papandreou, the former prime minister, whose unilateral proposal recently to hold a referendum angered stakeholders and roiled markets. Given a sea of problems, Mr. Papademos now has the monumental task to oversee a new set of austerity measures to justify a second bailout package for Greece. Both these developments have been well taken by investors globally. But while hopes are certainly up, investors are well-aware that these appointments alone cannot solve the problems in the Eurozone. Many believe that uncertainties will continue to linger until European leaders take a strong, united stand to stamp out the crisis, including use of a more growth-friendly approach. The Indian markets failed to respond positively to the European developments last week. One of the key reasons was the poor IIP growth of 1.9% announced Friday, led by a steep decline in capital goods, as it became increasingly evident that economic growth may be more pronounced than expected (even ex-capital goods). Accordingly, many economists have started factoring growth at sub-7.5% levels. Meanwhile, Moodys downgrade of India banks added to market woes last week. We continue to believe that the prevailing uncertainty and volatility are opportunities for long-term investors to accumulate sound bets. Technically, the Nifty is expected to trade in the 5,100-5,300 range in the near term.
Sectoral snapshot (Week on Week)
FM CG Cem ent S o f t w a re S e rv ic e s Te le c o m A uto E n e rg y U t ilit ie s C o n s u m e r D u ra b le s N if t y P h a rm a F in a n c ia l S e rv ic e s In f ra s t ru c t u re C a p it a l G o o d s B a n kin g M e t a ls a n d M in in g R e a lt y S ug ar -1 0 . 0 0 % -8 . 0 0 % -6 . 0 0 % -4 . 0 0 % -2 . 0 0 % 0.00% 2.00% 4.00%
C o n t e n t s
From the Editors desk The week that was... Index nuggets F&O strategy Liquid futures & options Mid-cap futures Hybrid strategy Pair strategy SGX Nifty monitor Sensex futures round-up Markets at a glance Datatron : : : : : : : : 4 4 4 4 5 5 5 6 : : : 1 2 3
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Domestic markets...
There were only three trading sessions last week in the domestic markets.
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Index Nuggets
The domestic indices remained mixed and negative through the week. A short week, the markets failed to maintain its momentum above the 5,300 mark and saw prot-taking from the highs. The week began on a at-to-positive note at 5,300 levels, before correcting on prottaking. Thereafter, there was a at opening on Wednesday and a sharp decline in the last 30 minutes of trade on the back of negative global cues. The Nifty opened gap-down on Friday, below the 5,200 mark; the Index witnessed severe pressure to close the week below 5,200 levels. It ended on a negative note, losing 2.18% W/W.
Futures status Contract Nov Dec Futures 5191.75 5216.50 % Chg (price) -2.35 -2.40 OI (`. cr.) 13866.33 1050.06 % Chg W/W (OI) -2.75 36.23 CoC CoC (11-Nov) (04-Nov) 12.44 7.01 11.28 7.23
The overall market cost-of-carry ended at 8.39%. The Nifty open interest was Rs17,540 crore for futures and Rs 62,091 crore for options. The open interest for stock futures was Rs32,642 crore, whereas it was Rs5,925 crore for stock options. The basis stayed at a premium throughout the week. The November contract closed the week at a premium of 22.90 points, whereas December closed at a premium of 47.65 points. The put-call ratio of open interest fell early in the week, before stagnating towards the weekend, closing at 1.36%. Currently, the highest concentration of open interest in the November series is at the 5,000-strike put and 5,400-strike call, with open interest of more than 67 lakh shares apiece. The 5,100 and 4,900 put-option strikes have more than 55 lakh and 44 lakh shares in open interest, respectively. Among call options, the 5,500 strike has open interest of more than 56 lakh shares, followed by the 5,300 strike with 54 lakh shares. The implied volatility (IV) of call options for the week closed at 26.66% whereas it was 23.61% for puts. Bank Nifty The Index ended on a negative note, declining 5.53% W/W, thereby largely underperforming the broader markets. On the F&O front, it added 8.66% in open interest on Friday and 14.12% W/W on the back of rising cost-of-carry, indicating addition of long positions. The Bank Nifty has support around 9,050 and 8,800 levels and is likely to face stiff resistance around 9,350 and 9,500 levels for the week. Our take Owing to mixed (and, therefore, cautious) global cues hereafter, the market is expected to remain in the 5,100-5,300 range in the near term. If the Index crosses and sustains the 5,200 mark on a closing basis, it could gradually inch up towards 5,300 levels on the back of short-covering and fresh buying. Alternatively, a failure to cross the 5,200 mark will induce further selling pressure, dragging the Nifty down to lower supports of 5,100 levels. Nifty Buy Nifty November futures @ 5,150-5160* Average: 5,100 stop loss: 5,080* target: 5,200, 5,250* (*spot levels) Nifty strategy Short Strangle: Sell 1 lot of 5100 PE @ 50-55 and Sell 1 lot of 5300 CE @ 40 - 45. UBEP: 5390 and LBEP: 5020. Max Prot: 4500 and Max Loss: Unlimited. SL: 120 (Cumulative Premium) Nifty options
Symbol Nov5100P Nov5300C Recomm Short Short Entry 50-55 40-45 Stop Loss 5100 (Spot) 5250 (Spot) Target 30-32 15-20 Time Frame 1 Week 1 Week
Options OI Concentration
5500 Tho us and s 5400 5300 5200 5100 5000 4900 4800 4700 P ut Call 4600 4500 6900 4900 2900 900 1100 3100 5100
Technically, the Nifty continues to trade below its long-term average (200-day EMA), indicating strong resistance around the zone, at 5,334 levels, while the 14-day RSI along with MACD have turned lower, indicating bearish sentiment. With no immediate domestic trigger, global factors will continue to play an inuential role in the near term. Hence, investors are advised to remain cautious and adapt to speculative trades with a mix of both long and short portfolios. As on Friday, the overall market open interest for the November series rose to Rs118,198 crore, with open interest addition of 1.75% and 2.78% W/W. This was on the back of rising cost-of-carry, indicating addition of long positions across the board. The standalone Nifty shed 1.55% in open interest on Friday and added 1.88% W/W, on the back of rising cost-of-carry, implying closure of short positions and fresh addition of speculative long positions.
- Kalyan C. Reddy
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Mid-cap futures
For the week, we recommend assuming long positions in FMCG and energy. Meanwhile, fresh short positions can be assumed in BFSI and metals stocks.
Recommendations
Strategy
Hybrid strategy Bear Put in ICICI Bank: ICICI Bank futures saw closure of long positions as the stock shed 1.22% in open interest along with a decrease in cost-of-carry from 13.98% to 5.50%. On the options front, the 900-strike call option has the highest accumulation with 4,88,000 shares in open interest followed by the 880-strike call with 1,58,250 shares. There is marginal open interest in put options, indicating further downside in the stock from current levels. Buy one ICICI Bank Nov 820 PE @ 21-22 and sell one 800 PE @ 14-15; BEP: 818; max prot: Rs3,000 if stock remains below 800; max loss: Rs2,000 if stock remains above 820. Bull Call Ladder in Reliance: Reliance saw closure of short positions in the last session as the stock shed 3.16% in open interest along with an increase in cost-of-carry. On the options front, November ATM call options saw addition of long positions, indicating the stock is likely to trade with a positive bias. Technically, it is trading above its 20-day and 50-day SMAs, and is likely to test its 200-day SMA around 900 levels. Buy one Reliance Nov 880 CE @ 24-25, sell one Nov 900 CE @ 15-16 and sell one Nov 920 CE @ 8-9; LBEP: 882; UBEP: 938; max prot: Rs4,500 if stock remains between 900 and 920 levels; max loss: Rs500 if stock below 880 and unlimited above 938. Pair strategy ITC and Hind Unilever: ITC and Hind Unilever have shown correlated movement in the past, with rolling price correlation of 78% in the last six-month data-set. Hind Unilever had outperformed ITC in the recent past. The current price ratio of ITC and Hind Unilever is 1.55. The ratio is currently higher and looking stretched; we believe that it is likely to converge towards the mean levels. The mean price ratio is 1.20 and the current price ratio is only 98 percentile away from the mean ratio. There is a high probability of convergence between the stocks from current levels. Buy ITC one lot Nov futures @ 210-213 and sell one lot Hind Unilever Nov futures @ 396-400; current price ratio: 1.55; target: 1.30 and 1.22; SL: 1.68.
- J. K. Jain
Symbol Reliance TCS Bharti Bajaj Auto Hind Unilever ICICI Bank Axis Bank L&T Tata Steel DLF Symbol Idea TCS
Expiry Nov Nov Nov Nov Nov Nov Nov Nov Nov Nov Option Nov 95C Nov 1140C
Action Long Long Long Long Long Short Short Short Short Short
Entry 863-865 1,120-1,125 388-390 1,715-1,720 390-393 840-842 Below 1,050 1,345-1350 442-445 Below 224 Best buys
SL 845 1100 384 1,695 386 860 1,075 1,375 460 230 SL 0.5 8 2
Target 890, 905 1,155, 1,170 400, 405 1,765, 1,785 405, 412 815, 800 1020, 1000 1,300, 1,280 420, 410 210, 205 Target 4.5-5 30-32 10-12 TF
TF 1 Week 1 Week 1 Week 1 Week 1 Week 1 Week 1 Week 1 Week 1 Week 1 Week
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VOLUME
Open Interest
240000
210000
180000
150000
120000 90000
60000
5300 5100
4900 4700
17-Mar 11-May
30000
0
30-May 10-Nov 20-Jan
22-Apr 16-Jun 29-Aug
The Sensex closed in the red with a loss of 2.11% over the week. It has crucial supports placed at 17,000 and 16,900 levels for the week while resistances are placed at 17,300 and 17,500 levels. For more details, please contact kalyanc@karvy.com
4-Oct
10-Aug
28-Feb
15-Sep
Markets at a Glance
Top 10 OI gainers (weekly) Top 10 OI losers (weekly)
Stock TATACHEM BANKINDIA AUROPHARMA BOSCHLTD BPCL JPPOWER KFA SBIN TRIVENI NTPC
OI 552000 4275500 4598000 6750 1780500 8024000 13448000 8353000 2266000 21654000
CoC (%) 24.60 -43.58 6.31 8.34 13.57 18.87 14.29 12.02 14.04 21.02
OI Chg (%) 48.39 39.65 39.33 38.46 37.12 34.27 34.16 28.94 26.88 24.21
Trading View Long Long Short Long Short Long Short Short Short Short
21-Oct
5-Apr
3-Jan
9-Feb
5-Jul
22-Jul
Stock IDEA JETAIRWAYS ASHOKLEY ONMOBILE ORCHIDCHEM ALBK TVSMOTOR VIJAYABANK DELTACORP JUBLFOOD
OI 9616000 1207500 24624000 1694000 5555000 2108000 4548000 6052000 7668000 926000
CoC (%) -2.96 -3.16 15.34 2.08 0.79 7.57 6.29 -2.41 16.98 11.26
OI Chg (%) -21.26 -20.98 -14.90 -14.01 -13.12 -13.07 -12.13 -11.16 -11.13 -10.55
Trading View Long Long Short Long Long Long Long Short Short Long
Sector OI Change
Date
Sector
OI Shr (Cr)
% Sector Chg
OI Shr (Cr)
% Chg
Sector
OI Shr (Cr)
% Chg
08-Nov-11 256.50545153.00 152.57 1574841 -217.86 1174288 09-Nov-11 535.29559468.00 -250.82 1583358 -275.29 1178749
PCR OI
PCR OI 2.60 2.10 1.60 1.10 0.60
PC R O I h ad d ro p p ed all th ro u g h th e w eek an d is exp ected to d ro p fu rth er.
Auto 11.91 -3.24 Fertilizers 0.91 BFSI 29.45 2.53 FMCG 12.89 Cap Goods 16.04 5.74 Infra 19.81 Cement 2.15 3.54 Media 2.43 Consumer Dur 13.49 0.08 Metals 17.29 Energy 7.56 0.61 Pharma 3.13
Realty 11.64 Software 8.31 Sugar 6.70 Telecom 9.96 Utilities 20.84
NSE VIX
8-DMA
12-Aug 18-Sep 27-Oct 4-Dec 13-Jan 18-Feb 30-Mar 12-May 16-Jun 21-Jul 25-Aug 1-Oct 9-Nov 14-Dec 21-Jan 26-Feb 7-Apr 13-May 17-Jun 22-Jul 26-Aug 30-Sep 4-Nov 13-Dec 18-Jan 23-Feb 31-Mar 10-May 14-Jun 19-Jul 24-Aug 30-Sep 11-Nov
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4-Jan 3-Feb 5-Mar 7-Apr 7-May 7-Jun 5-Jul 3-Aug 1-Sep 1-Oct 1-Nov 2-Dec 3-Jan 2-Feb 4-Mar 4-Apr 6-May 6-Jun 5-Jul 3-Aug 6-Sep 5-Oct 8-Nov
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Datatron
Symbol Avg. Vol (Contracts) Price (Rs.) Price (Rs.) 04-Nov 5284.20 1966.15 9836.35 5284.20 884.30 467.15 879.95 188.10 1128.50 2825.95 247.60 711.55 1393.70 139.25 1099.80 379.65 341.75 101.10 373.85 164.10 129.00 483.00 83.25 457.00 239.05 266.65 79.25 209.95 99.55 306.35 978.50 397.30 836.35 430.15 504.10 195.65 210.35 276.80 77.30 814.70 316.50 835.55 1122.25 683.90 217.00 56.75 578.05 334.05 2113.80 122.75 OI (Rs.Cr) 11-Nov 14916 1503 1911 500 1289 968 1347 920 839 1015 551 479 941 350 660 560 140 156 180 162 299 834 216 228 248 46 268 264 219 401 441 588 426 105 149 86 765 339 176 220 163 86 336 635 210 133 267 330 225 313 MaxOI (Rs.Cr) 26634 2135 3978 1329 2394 1783 5561 1730 1007 1854 1083 850 1826 993 767 831 293 822 1866 518 1177 1256 3413 3714 533 360 1782 978 661 700 497 1290 838 600 888 573 836 1103 484 303 331 256 674 771 418 592 1454 890 852 1562 % Chg. OI 04-Nov 1.88 28.94 14.12 -5.62 5.76 -0.19 -4.45 -2.06 1.90 0.57 1.35 -8.41 6.46 0.51 2.08 2.16 39.65 10.37 -5.81 15.52 6.81 -0.85 -8.52 -1.26 1.08 11.50 1.98 5.86 10.69 -7.29 11.82 11.17 2.58 12.64 7.57 8.09 3.07 7.00 7.00 -1.21 -5.72 2.37 -2.53 -2.98 -7.80 20.23 0.96 -4.09 -6.23 0.94 % Chg. OI (Inception) 25-Oct -7.45 112.03 28.28 -20.76 33.16 -12.93 -31.75 320.14 134.55 -5.87 51.07 47.44 124.95 1.97 11.94 4.37 -15.84 -24.43 -57.00 505.91 -5.19 544.80 -27.35 -40.35 202.21 -58.61 -1.93 -23.88 -32.74 -19.42 131.58 -25.93 -50.60 -31.13 -47.80 -14.07 5.32 271.48 37.08 46.09 -7.70 -28.28 9.59 -3.72 1483.47 -58.24 -30.06 243.61 -71.04 1.10 CoC (%) 11-Nov 12.44 12.02 8.29 12.09 15.22 0.65 10.78 13.93 15.27 17.09 -2.47 2.71 16.46 18.54 1.24 8.16 -43.58 6.18 15.24 18.72 15.37 14.82 11.75 17.64 -26.19 -10.45 18.51 12.21 -17.99 -4.46 -47.82 18.10 5.84 -21.97 18.58 2.84 17.16 19.02 3.89 12.67 17.42 6.38 17.62 16.63 11.76 13.62 14.65 3.89 6.01 17.97 CoC (%) 04-Nov 11.28 7.52 8.40 11.12 11.76 -2.54 13.38 12.61 9.14 12.46 -9.58 12.05 12.18 11.80 11.37 8.17 0.53 13.54 8.54 3.34 13.44 9.82 9.86 13.58 -1.53 11.64 6.91 9.56 -16.50 0.89 -21.26 12.86 9.16 -2.33 7.60 1.87 13.88 12.53 7.08 9.41 4.61 7.86 9.76 12.94 5.89 11.26 10.89 2.73 11.44 16.35 Delivery Avg. (%) Spot 23.91 40.61 24.99 44.41 32.82 36.89 51.52 20.30 16.21 37.11 43.10 36.04 71.46 54.45 13.52 12.08 45.39 35.56 58.79 14.54 11.84 53.66 15.36 25.37 31.23 32.31 56.85 23.31 52.42 44.16 8.29 29.06 35.87 58.12 43.84 24.96 29.91 51.59 40.82 41.83 66.18 40.74 15.93 26.88 61.73 77.55 30.38 11-Nov NIFTY 347946 5168.85 SBIN 77839 1798.35 BANKNIFTY 75653 9292.55 MINIFTY 44875 5168.85 ICICIBANK 23433 821.00 TATASTEEL 15986 429.85 RELIANCE 15774 885.35 TATAMOTORS 14973 181.45 AXISBANK 13101 1057.00 INFY 11927 2775.70 DLF 11245 227.50 JSWSTEEL 9142 674.00 LT 8759 1330.40 HINDALCO 8490 128.70 TCS 7669 1131.00 HINDUNILVR 6854 395.65 BANKINDIA 6469 331.80 HDIL 6323 90.90 RELCAPITAL 6095 359.30 PFC 5770 165.00 IDFC 5695 118.75 HDFCBANK 5682 464.05 RCOM 5545 83.65 RELINFRA 5065 453.70 LICHSGFIN 5030 230.45 EDUCOMP 5008 241.80 JPASSOCIAT 4698 75.85 SESAGOA 4577 207.00 RPOWER 4382 101.45 CAIRN 4312 314.60 PNB 4226 954.15 BHARTIARTL 4179 395.60 M&M 4057 841.40 ABAN 3988 421.70 RANBAXY 3965 468.35 RECLTD 3860 197.55 ITC 3582 212.65 ONGC 3528 265.65 IBREALEST 3437 72.15 BANKBARODA 3206 775.85 YESBANK 3195 298.25 MCDOWELL-N 3164 835.75 MARUTI 3105 1059.75 HDFC 3092 666.70 TITAN 3073 214.80 RENUKA 2729 51.55 JINDALSTEL 2717 555.65 BHEL 2649 324.40 HEROMOTOCO 2609 2172.95 STER 2575 117.20 *Top 50 stocks selected on the basis of traded volumes.
(Compiled by J. K. Jain)
Disclaimer: The information and views presented in this report are prepared by Karvy Stock Broking Limited. The information contained herein is based on our analysis and up on sources that we consider reliable. We, however, do not vouch for the accuracy or the completeness thereof. This material is for personal information and we are not responsible for any loss incurred based upon it. The investments discussed or recommended in this report may not be suitable for all investors. Investors must make their own investment decisions based on their specic investment objectives and nancial position and using such independent advice, as they believe necessary. While acting upon any information or analysis mentioned in this report, investors may please note that neither Karvy nor any person connected with any associated companies of Karvy accepts any liability arising from the use of this information and views mentioned in this document. The author, directors and other employees of Karvy and its afliates may hold long or short positions in the above-mentioned companies from time to time. Every employee of Karvy and its associated companies are required to disclose their individual stock holdings and details of trades, if any, that they undertake. The team rendering corporate analysis and investment recommendations are restricted in purchasing/selling of shares or other securities till such a time this recommendation has either been displayed or has been forwarded to clients of Karvy. All employees are further restricted to place orders only through Karvy Stock Broking Ltd The report is intended for a restricted audience and we are not soliciting any action based on it. Neither the information nor any opinion expressed herein constitutes an offer or an invitation to make an offer, to buy or sell any securities, or any options, futures or other derivatives related to such securities.
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