Markets Today - 5/5/2010 - Analyzed - Disclaimer Post Applies

Nifty futures closed at 5120.15 at a discount of 5 points over the Nifty spot which closed at 5124

Implications: Increase in Volatility, futures in discount and shift in concentration of put at lower levels with higher call writing for consecutive 4^th trading sessions imply weakness at current levels. We expect markets to take a strong support at 5,000 levels for intermediate term and 5250/5300 to act as a resistance for near term and 5,400 for May expiry.

Option Analysis

·         Call Writing: Since 29^th April, 2010, we have observed major addition of open interest taking place at 5,200 and 5,300 strike prices. Out of 46 lakh fresh addition in open interest, ~53.3% took place in above strike prices. Concentration of open interest stood at 5,300 of 64.67 lakh shares.

·         Put Writing: On other hand, major activity from same date has taken place below 5,000 strike prices. Out of 54 lakh shares, ~70% addition was seen between 5,000 and 4,700 levels. In today’s trading session, we have observed concentration shifting from 5,200 to 4,900.

Implications: Higher activity in out-of-money call strike prices, less put activity in in-the-money strike prices with concentration shifting to 4,900 indicates lack of confidence among traders for major upside movement. However, we see downside limited to 5000 or 4900 in worst case scenario, upside may be capped to 5300. We also expect an intermediate rise till 5150 which should be used as an opportunity to short /exit the market.

 FIIs and DIIs activity in capital market segment

·         FIIs were net sellers of Rs 1589 crore with Gross buyers of Rs 2,027 crore and Gross Sellers of Rs 3,616 crore.

·         DIIs were net buyers of Rs 691 crore with Gross buyers of Rs 1,832 crore and Gross sellers of Rs 1,141 crore.

India VIX (Inverse relationship between Nifty and Indian VIX)

·         Volatility for 5^th May, 2010 close at 23.7 which is 1.65% higher as compared to previous close, after touching an intraday high of 25.15 and low of 23.3.

Implications: Volatility maintained yesterday level of 23 with a marginal increase in today’s session. We still hold our “Bullish” view on Volatility and expect it to increase to 30 odd levels

 Thanks,

Dewang K Mehta

DENIP Consultants - www.denip.in