Markets Today - 11/6/2010 - Disclaimer Post applies

Implications: We have Bullish View on market on account of decrease in volatility, reduction in the discount of futures to great extent and major writing witnessed in puts at 5,000 levels than calls. However, the upside is capped at 5,200 on account of call concentration whereas the downside is limited to 5,000 for intermediate term and 4,800 for June series.

Option Analysis

·         Call Writing: In this week, fresh writing was observed at higher strikes and shedding at lower strikes. Major writing was witnessed between 5,500 to 5,000 strike price where the combined open interest build up at these strikes comes to 42.45 lakh shares with maximum writing at 5,000 and 5,300 strikes. Concentration of call witnessed at 5,200 strike price of 70.58 lakh shares.

·         Put Writing: On the other hand, fresh writing was witnessed between 5,300 to 4,300 strikes except 4,900 where the combined open interest build up at these strikes comes to ~80 lakh shares with maximum writing witnessed at 5,00, 4,800 and 4,900 strike prices. In this week, we have observed shift in concentration from 4,800 to 5,000.

 Implications:  Strong put writing at and below 5,000 levels indicates markets to take its first intermediate support at 5,000 and thereafter 4,800 for June series. On the other hand, bounce back from current levels may take Nifty to 5,200 for intermediate term and above that 5,300 for June series.

FIIs and DIIs activity in capital market segment

·         FIIs were net buyers of Rs 820 crore with Gross buyers of Rs 3,288 crore and Gross Sellers of Rs 2,467 crore.

·         DIIs were net sellers of Rs 213 crore with Gross buyers of Rs 1,212 crore and Gross sellers of Rs 1,425 crore.

India VIX (Inverse relationship between Nifty and Indian VIX)

·         Volatility for 11^th June, 2010 close at 25.1 which is 5.28% lower as compared to previous close, after touching an intraday high of 25.68 and low of 24.79.

Implications: Volatility plunged further to 25 levels in today’s trading session. We maintain our bearish view on volatility implies going “Short on Volatility and Long on Nifty”