>Daily derivatives (ICICI Direct)

Derivative Comments

• The Nifty May series added 2.60 lakh shares in OI with rise in price by 0.22%. The OI activity was negligible in Nifty futures

• The options data shows addition of 10036 contracts in the 3600 Put followed by 6236 contracts addition in 3500 Put. Nearly 4600 contracts got added in the 3200 Put. The IVs of all these Puts have risen by 1.5 to 2 basis points and the current Put IVs are above 50. However, the Put volumes have not increased substantially suggesting some Put buying in these Put options. This buying could also be on account of “portfolio hedging”. On the flip side, 10773 contracts got added in the 3800 Call where the IV has moved from 46.18 to 47.66. The 3900 Call added 4204 contracts with stupendous rise in volumes. All these indicate that some Call writing has happened in 3800 and 3900 strike price Calls. With 2.87 million shares in OI, the 3800 Call stands as the largest Call OI base. However, the Put base of 2 million shares in OI in the 3600 Put suggests this level may continue to act as a support for the Nifty on a closing basis

• Some short positions to the tune of Rs 261 crore were formed by FIIs in Index futures

Technical Outlook

• The Nifty closed flat after a volatile session. Profit booking was seen at higher levels as expected. On the sectoral front, the realty index gained more than 8%, followed by metals and banking gaining 2-3% each. The IT and FMCG sector indices faced profit booking

• The Nifty formed a ‘Doji’ after previous two bull candles, which suggests indecision around 3700
levels. The Nifty holding the levels of 3620-3600 would be positive for intra day. However, failure to hold these levels may result in further profit booking. On the higher side, 3730-3750 remains the short-term target

• The Nifty spot has supports at 3620, 3570 and resistances at 3680, 3730

• FIIs were net buyers to the tune of Rs 508 crore whereas DIIs were net sellers to the tune of Rs 129 crore in the cash segment

To see full report: DERIVATIVES 060509