Nifty futures are now trading at a much lesser discount (just 4 points) to its spot price. With Nifty up by 1% and the FIIs still selling we believe that unless there is a follow up buying seen from the FIIs fresh new shorts will enter the system tomorrow. However as mentioned earlier, we expect Nifty to take a strong support at 4800 -4900 levels whereas 5000 - 5100 to act as strong resistance. Fresh put writing suggest that the Nifty might bounce back sharply from the current levels.
Option Analysis
· Call Writing: Fresh addition of open interest at higher levels and concentration indicates that the Nifty might actually test 5100 post which 5200 will act as a major resistance for June Series. In today trading session, major activity was observed at 5200strike prices which added 7.63 lakh contracts.
· Put Writing: On the other hand, 4900 strike prices witnessed higher activity as compared to lower levels which is good for the markets. Major writing was witnessed at 4900 strike price in today’s trading session of 9.84 lakh shares and marginal shedding at 5200 strike price. Concentration is observed at 4900 strike price of ~64 lakh contracts. This indicates that 4900 should act as a decent support for the markets.
Implications: Higher activity in out-of-money call strike prices and put strike prices indicates less possibility for any major upside movement. However, on account of concentration the upside is capped at 5200 levels and the downside is limited to 4800 levels.
FIIs and DIIs activity in capital market segment
· FIIs were net sellers of Rs 166.5crore with Gross buyers of Rs 2,220 crore and Gross Sellers of Rs 2,387 crore.
· DIIs were net buyers of Rs 165.16 crore with Gross buyers of Rs 1,331 crore and Gross sellers of Rs 1,166 crore.
India VIX (Inverse relationship between Nifty and Indian VIX)
· Volatility for 1st June, 2010 close at 27.76 which is 4.54% lower as compared to previous close, after touching an intraday high of 29.27 and low of 27,76.
Implications: We believe that Volatility will now start to peak out and one can go short on volatility on every rise.
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