Technical Picks | May 4, 2012

GAAR and Global cues to dictate the trend

Sensex (16831) / Nifty (5087)
We had a quiet start for the week in-line with other Asian bourses and indices then moved higher on Monday's session to close near the 5250 mark. However, strong selling pressure in the markets on the back of significant Rupee depreciation resulted in Indices drifting lower to close at the lowest point of the week. This has resulted in violation of recent swing low of 16920 / 5135 and a closing below '200-day SMA' and '20-week EMA' mentioned in our earlier report. The sharp correction was mainly observed in Banking, Auto, Metal and Capital Goods counters; whereas IT, Teck and Health Care sectors ended in the positive territory. The Sensex ended with a loss of 2.07%; whereas Nifty lost 2.34% vis--vis the previous week.
Source: Falcon

Exhibit 1: Sensex weekly chart

Exhibit 2: Sensex daily chart

Pattern Formation
The 200-day SMA (Simple Moving Average) and 20-day EMA (Exponential Moving Average) have now shifted to 5225, 17000 / 5120 and 17220 / 5225 respectively. The '20-Week EMA' is placed at 17200 / 5200 level. We are witnessing a negative crossover in weekly '5 & 20 EMA'. We are observing a continuation pattern which resembles a 'Falling Wedge'. Indices have now tested 16830 / 5080 which is the 50% Fibonacci Retracement level of the rise from 15135 / 4531 (Low on December 23, 2011) to 18524 / 5630 (High on February, 2012).
Source: Falcon

Friday's low of 16776 / 5080 In this scenario, selling pressure 5080. may persist and indices are likely to drift lower to test 16600 - 16430 / 5000 - 4950 levels. However it must be noted that at present markets are hovering around the 50% Fibonacci Retracement level of the steep rise from 5630. 15135 / 4531 to 18524 / 5630 The mentioned level is at 16830 / 5080 and considered as a decent technical support. In addition, we are observing that markets are moving in a continuation pattern called as 'Falling Wedge' (Refer Exhibit 2). The break out from the said pattern will be confirmed only if indices close above the upper trend line level of 17300 / 5230. This may boost the buying interest among market participants and eventually indices may rally higher to test 17530 - 17664 - 17871 / 5342 - 5380 - 5445 levels. Market participants are advised to take positions post clarification of the GAAR issue as it would have a significant impact on trader sentiment.

Future Outlook
We have been mentioning a trading range of 17530 to 16920 / 5345 to 5135 in the last couple of reports. Markets have now closed below '200-day SMA' and '20-week EMA' level on account of selling on Friday's session. We are now observing a negative crossover in weekly '5 & 20 EMA'. The impact of this technical signal would be witnessed if indices sustain below

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Technical Picks | May 4, 2012

Weekly Pivot Levels For Nifty 50 Stocks

SCRIPS
SENSEX BANKNIFTY NIFTY 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 INFOSYSTCH ITC JINDALSTEL JPASSOCIAT KOTAKBANK LT M&M MARUTI NTPC ONGC PNB POWERGRID RANBAXY RELIANCE RELINFRA SAIL SBIN SESAGOA SIEMENS STER SUNPHARMA TATAMOTORS TATAPOWER TATASTEEL TCS WIPRO R2 17,669 10,605 5,355 1,272 157 3,758 1,177 1,692 807 326 235 692 358 341 365 200 1,813 343 2,667 533 690 567 2,387 125 452 928 127 2,551 254 532 77 607 1,278 737 1,452 168 275 903 114 519 763 555 100 2,235 195 800 110 620 327 109 484 1,350 430 R1 17,250 10,204 5,221 1,240 150 3,687 1,093 1,597 747 319 225 672 346 334 347 191 1,780 332 2,543 523 675 552 2,182 120 444 880 121 2,497 246 509 74 586 1,213 712 1,367 162 267 854 111 509 745 525 97 2,115 188 775 106 611 314 105 458 1,313 423 PIVO PIVOT 17,013 9,981 5,146 1,218 145 3,579 1,046 1,545 714 313 218 659 338 322 338 185 1,758 324 2,472 515 667 543 2,074 117 429 848 116 2,443 242 492 72 572 1,172 697 1,314 158 263 824 108 502 733 508 95 2,051 184 760 103 600 305 102 444 1,259 412 S1 16,594 9,579 5,012 1,186 138 3,508 962 1,450 654 306 208 639 326 314 320 176 1,725 313 2,348 505 651 529 1,870 113 420 801 110 2,389 234 469 69 551 1,107 672 1,229 151 255 775 105 492 715 478 92 1,932 177 735 99 591 292 97 418 1,222 405 S2 16,358 9,356 4,937 1,164 134 3,400 915 1,398 622 300 201 626 318 303 311 170 1,703 304 2,277 496 643 520 1,761 110 406 768 105 2,336 230 452 67 538 1,066 657 1,176 147 250 746 102 485 704 461 90 1,867 173 720 96 580 283 95 403 1,167 394

Technical Research Team

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Derivatives Review | May 4, 2012

Further downside likely but sell on rise

Nifty spot closed at 5086.85 this week, against a close of 5209.00 last week. The Put-Call Ratio decreased from 1.10 to 1.04 levels and the annualized Cost of Carry is positive 2.95% The Open Interest of Nifty Futures increased by 5.93% 2.95%. 5.93%.

Put-Call Ratio Analysis

PCR-OI has decreased from 1.10 to 1.04 levels. The reason for decrease in ratio was due to good amount of unwinding observed in 5200 and 5400 put option and simultaneously significant amount of buildup was seen in 5200-5300 call option. Later in this week we have seen strong buildup in 5000 put option indicating the support has now shifted from 5200 to 5000 levels, which is more of psychological support. We have also seen decent amount of buildup in 4600 put option in Friday's trading session.

Implied Volatility Analysis

Implied Volatility (IV) for NIFTY has increased from 16.87% to 19.86%. Historical volatility (HV) is at 21.24% and that for BANKNIFTY is trading at 29.88%. Liquid counters having very high HV are IGL, IRB, PANTALOONR, LITL and PUNJLLYOD. Stocks where HV are on lower side are HDFC, HINDUNILVR, DRREDDY, ITC and VIDEOIND

Open Interest Analysis

Total open interest of market has increased from `87,024/crores to `99,989/- crores. Stock futures open interest has decreased from `25,554/- crores to `25,330/- crores. Some of the big names which added open interest are HEROMOTOCO, AXISBANK , TCS, SESAGOA and BANKBARODA. Open interest was shed in large cap names like INFY, ICICIBANK, JINDALSTEEL, MARUTI and HINDALCO.

Cost-of-Carry Analysis
Nifty futures closed at a premium of 11.10 points against the premium of 23.20 points to its spot. Next month future is trading with premium of 29.00 points. Liquid counters where CoC is high are ABGSHIP TATACOFFEE, IOC, GVKPIL and ALOKTEXT. , Stocks with negative CoC are SUZLON, ALBK, UNIONBANK, PUNJLLYOD and ICICBANK.

Derivative Strategy
Scrip : NIFTY View: Mildly Bearish Buy/Sell BUY SELL SELL
BEP: BEP: 4700 Max. Risk: Unlimited
If NIFTY continues to move below BEP .

CMP : 5086.85

Lot Size : 50

Exercise Date (F & O) : 31st. May 2012 Expected Payoff

Price Closing Price (` (`) Expected rofit/Loss Profit/Loss

Strategy: Long Put Ladder Scrip NIFTY NIFTY NIFTY Strike Price 5000 4900 4800 Series MAY MAY MAY Option Buy/Sell Rate Type (`) PE PE PE 70.00 45.00 25.00

Qty 50 50 50

4600 4700 4800 4900

(`100.00) 0.00 `100.00 `100.00 0.00 0.00

Profit: Max. Profit: `5000/If NIFTY closes on or between 4800-4900 on expiry.

5000 5100

NOTE TE: NOTE : Profit can be booked before expiry if NIFTY moves in the favorable direction and time value decays.

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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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