Markets Today - 30/6/2010 - Disclaimer Post Applies

In Yesterday trading sessions, after a weak put writing for consecutive two trading sessions, we have observed higher put writing than call writing at lower levels. More than ~8 lakh shares were added in put option strike prices between 5,000 to 5,300 indicates market bottoming out at lower levels or creating strong support at lower levels. However, on other hand, major call writing at higher levels like 5,300 and 5,400 indicates less upside from current levels. So, we believe market would be trading in a narrow range of 5,200 and 5,400 for near term and 5,000 at lower end for July series. The strategy a traders can adopt is to sell 5,400 CE and 5,000 PE and hold till expiry.

Option Analysis

·         Call Writing: Major activity was observed at 5,400 strike price which added 4.64 lakh shares and 5,200 strike price which added 4.66 lakh shares. Major concentration can be observed at 5,500 & 5,400 where the combined outstanding total open interest is 1.34 crore shares.

·         Put Writing: On the other hand, major writing was observed at lower levels. More than ~8 lakh shares were added between 5,200 and 5,000 strike prices each. Major concentration was observed at 5,200 strike price of 8.29 lakh shares indicating strong support at 5,200.

Implications: More of put writing than call at lower levels indicates Nifty to take strong support at every lower level and more of call writing than puts at higher strike indicates Nifty would face resistance at every higher level. Thus, we expect 5,200 to act as a major support and below that 4,800 whereas upside may be capped to 5,300 and above that 5,400.

FIIs and DIIs activity in capital market segment

·         FIIs were net buyers of Rs 589 crore with Gross buyers of Rs 3,243 crore and Gross Sellers of Rs 2,653 crore.

·         DIIs were net sellers of Rs 151 crore with Gross buyers of Rs 1,422 crore and Gross sellers of Rs 1,573 crore.

India VIX (Inverse relationship between Nifty and Indian VIX)

·         Volatility for 30^th June, 2010 close at 20.07 which is 2.76% lower as compared to previous close, after touching an intraday high of 21.78 and low of 20.03.

Implications: Indian VIX is trading at its support. We expect it to move up and are “Bullish” on the same.