Market Analysis - 11/5/2010

Implications: Increase in Volatility, futures in discount and higher call activity indicates further weakness at current levels. We believe market to trade in range of 5,100 and 5,300 for intermediate and May series. Strategy in the Nifty remains the same as mentioned earlier   

Option Analysis

·         Call Writing: Fresh addition of open interest was observed at 5,200 and 5,100 strike prices of 4.9 lakh and 3.9 lakh shares respectively. Concentration of open interest stands at 5,300 acting as a major resistance for May expiry.

·         Put Writing: In today’s trading session, major shedding in open interest was observed at 5,000 strike price of 3.13 lakh shares with fresh writing at 4,800 strike of 3.56 lakh shares. Major concentration of open interest is observed at 5,000 and 4,900 strike price.

Implications: Higher activity in call than put and shedding in put options at-the-money and in-the-money strike prices would invite further selling pressure at current levels. However, we expect market to trade in range of 5,100 and 5,300 for intermediate and 5,000-5,300 for May series.

 FIIs and DIIs activity in capital market segment

·         FIIs were net buyers of Rs 20 crore with Gross buyers of Rs 2,452 crore and Gross Sellers of Rs 2,432 crore.

·         DIIs were net buyers of Rs 22 crore with Gross buyers of Rs 988 crore and Gross sellers of Rs 965 crore.

India VIX (Inverse relationship between Nifty and Indian VIX)

·         Volatility for 11^th May, 2010 close at 25.8 which is 6.9% higher as compared to previous close, after touching an intraday high of 25.95 and low of 23.35.

Implications: After witnessing a sharp fall yesterday, VIX rebounded in today’s trading session. We maintain our positive bias on VIX and expect it to increase further to 30 odd levels.