Monday, May 11, 2009

>Daily Derivatives (ICICI Direct)

Derivative Comments

• The Nifty May series witnessed an unwinding of 1.93 lakh shares in OI with fall in futures price by 1.62% depicting some closure of long positions in the Nifty

• The options data shows a net addition of 38041 contracts in Call options compared to 6885 contracts in Puts. While the FII data on index options shows a net buy, we infer they may have bought some Call options in Friday’s session. Nearly 12700 contracts got added in the 3600 and 3700 strike price Calls while an unwinding of 6566 contracts was seen in the 3800 Call. A total of 9430 contracts got added in the 4200 Call option. The volumes in 3600 and 3700 Call options
have risen with drop in IVs from 51.48 to 49.96 and 49.58 to 48.59, respectively. The 3400 and 3600 Puts added nearly 3900 contracts each. Some Call writing was seen in the 3600 and 3700 Call options whereas profit booking by Call writers was seen in the 3800 Call. We feel short covering by Call writers is likely in 3600 and 3700 Calls in today’s session. The market may continue to hold the support of 3600 on a closing basis

• The FII Index futures witnessed profit booking of long positions to the tune of Rs 423 crore with a drop in OI by 2.24%. However, the Index options witnessed an addition of 2.21% in OI with a net buy of Rs 483 crore

Technical Outlook

• The Nifty closed in the red by 1.72% after initial gap up action. Selling pressure was seen across the sectors led by banking, metal and IT indices losing 2-3% each

• The action displayed a bear candle with longer lower shadow indicating some support at lower levels around 3590 levels. However, we have seen in the past few days that the Nifty has struggled to sustain above 3700 levels. We expect the Nifty to consolidate further and continue to face resistance around 3700 levels

• The Nifty spot has supports at 3590, 3550 and resistances at 3665, 3730

• FIIs were net sellers to the tune of Rs 100 crore whereas DIIs were net sellers to the tune of Rs 90 crore in the cash segment

To see full report: DERIVATIVES 110509