Implications: Scope of ~300bps rise in Volatility, futures trading at discount and higher call activity would lead some more weakness at current levels. We expect markets to take a strong support at 4,900 levels and 5,300 to act as a resistance for near term and May expiry.
Option Analysis
· Call Writing: In this week, more activity was seen across strike prices and on overall basis 103 lakhs shares open interest was added. 84% of total fresh addition was seen between 5,000 and 5,200 strike prices. May series concentration observed at 5,300 of 65.8 lacs shares.
· Put Writing: On other hand, 90.7 lakh open interest were added at lower levels and shedding at higher levels. Major addition was seen between 4,800 to 5,000 strike prices. May series concentration observed at 4,900 of 71.6 lakh shares.
Implications: Weakness in the market was reflected through major activity happeing at call side. We see market to take strong support at 4,900 for intermediate & May series and 5,300 to act as a resistance. So, the strategy for traders to be adopted should be to sell put and buy at the money CE, when Nifty is closer to 4,950.
FIIs and DIIs activity in capital market segment
· FIIs were net sellers of Rs 1,308 crore with Gross buyers of Rs 2,573 crore and Gross Sellers of Rs 3,881 crore.
· DIIs were net buyers of Rs 654 crore with Gross buyers of Rs 1,676 crore and Gross sellers of Rs 1,022 crore.
India VIX (Inverse relationship between Nifty and Indian VIX)
· Volatility for 7th May, 2010 close at 27.4 which is 12.5% higher as compared to previous close, after touching an intraday high of 28 and low of 24.6.
Implications: As expected, volaitilty has shoot up sharply and reached near to its resisiatnce level 30, But, there is further scope of 300bps increase from current levels and maintain a positive bias on VIX.
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