Market Analysis - 10/5/2010

Activity: Short covering in Nifty futures and higher put writing at lower levels indicates some upside from current levels. But, we expect upside may capped to 5300 on account of concentration and higher Call activity at 5300 levels. The strategy to be adopted by investors should be to sell on rally and buy on dips 

Option Analysis

·         Call Writing: After witnessing continuous major call writing at lower strike prices in last week, in today’s trading session there was unwinding seen. More than ~8 lacs shares were added at 5300 and 5400 strike prices. Concentration level observed at 5300 of 74 lacs shares.

·         Put Writing: Major activity was observed at 5100 strike prices adding open interest of 17.92 lakh shares. Major concentration of open interest is observed at 5000 strike price of 73.51 lacs shares.

Implications: Strong put writing at lower levels and call writing at higher levels indicates market to trade in a narrow range for next few trading sessions. We believe market to trade in range of 4900 and 5300 for intermediate and May series.    

 FIIs and DIIs activity in capital market segment

·         FIIs were net buyers of Rs 263 crore with Gross buyers of Rs 3,123 crore and Gross Sellers of Rs 2,859 crore.

·         DIIs were net buyers of Rs 30 crore with Gross buyers of Rs 1,405 crore and Gross sellers of Rs 1,375 crore.

India VIX (Inverse relationship between Nifty and Indian VIX)

·         Volatility for 10^th May, 2010 close at 24.15 which is 11.9% lower as compared to previous close, after touching an intraday high of 26.2 and low of 20.65.

Implications: Confidence among traders coming back into market was reflected in sharp decline of VIX. But, still we maintain our Bullish view on Volatility.