>DAILY DERIVATIVES (ICICI Direct)

DERIVATIVE COMMENTS

• With another round of short covering continuing in the Nifty March series, the April futures added 5.71 million shares in OI with the discount almost vanishing. This suggests more long rollovers in Nifty. The rollover in the Nifty till date is 57.74% whereas marketwide rollover is 49.99%

• The options data depicts short covering in 2800, 2900 Call options wherein 2800 Call has seen an unwinding of 15129 contracts whereas the 2900 Call has seen a closure of 19959 contracts. The 2800 Call IV is at 44.57 while that of 2900 has surged from 39 to 44. The 9539 contracts addition in the 3100 Call was accompanied by a rise in IV from 36 to 43. This suggests some Call
buying has happened at this strike price. Unwinding of 15173 contracts in 2800 Put suggests profit booking by Put writers whereas addition of 13831 contracts in 3000 Put along with rise in IV from 36 to 44 indicates some Put buying in the latter half of the session. Moreover, the increasing trend of Put IVs in April series suggests more of Put buying has happened in OTM Puts. We feel the market is likely to take decent support at 2900 on a closing basis in today’s session

• FII index futures added stupendous OI by 13.23% with a net buy of Rs 371 crore

To see full report: DERIVATIVES 250309

>DAILY CALLS (ICICI Direct)

Sensex: We said, "Trading above candle's high of 9455 can test upper end of Green channel ... This could be the short term target/resistance for the Index." Up nearly 3% initially, Index did touch the target, only to find its short-term resistance as argued. Retracing all the gains, it closed flat. Metals lost 3%. A/D ratio ended -ve.

The action formed an up day, but a bear candle with an upper shadow. This indicates hesitation at technical resistance near upper channel and last month's high. But it doesn't indicate breakdown as yet, until we see a strong selling below its low at 9400. Holding 9400 can, therefore, encourage positive efforts, perhaps initially.

TO see full report: CALLS 250309

>DAILY MARKET & TECHNICAL OUTLOOK (ICICI Direct)

MARKET OUTLOOK

■ Indian markets are likely to open flat today, taking cues from global markets. Asian markets were trading mixed in the morning amid caution over whether US government moves to shore up the economy will succeed. Before this, US markets fell on the uncertainty of the US plan of buying toxic assets. Bank stocks, which posted their best day in at least 16 years on Monday, dragged Wall Street lower as investors booked profits amid questions whether the US government's plan to spend up to $1 trillion to buy up toxic bank assets would work. We saw Indian markets ending nearly flat on Tuesday after a volatile session. Crude bounced to settle near $54/bbl as the dollar strengthened. The rupee is expected to start weaker on Wednesday,
following the dollar’s gains against Asian currencies and month-end import payments heighten demand for the US currency

■ The Sensex has supports at 9420 and 9350 and resistances at 9650 and 9770. The Nifty has supports at 2920 and 2900 and resistances at 3000 and 3030

■ Asian stocks declined after Japan’s exports slumped by a record margin, metal prices dropped and Sanyo Electric forecast a loss. The Nikkei fell 61.6 points, or 0.7%, to trade at 8,426.7. The Hang Seng fell 197.8 points, or 1.4%, to trade at 13,712.5

■ US stocks slid on Tuesday as investors paused to reassess the likely success of the government's latest plans to clean up bank’s balance sheets and revive the financial system, a day after initial euphoria over the plan drove huge gains. The Dow Jones was down 115.65 points, or 1.49%, at 7,660.21. The S&P 500 was down 16.59 points, or 2.02%, at 806.33. The Nasdaq was down 37.43 points, or 2.41%, at 1,518.34

■ Stocks in news: Patel Engineering, GAIL, NIIT, Ashok Leyland, Reliance Communication and DLF

TECHNICAL OUTLOOK

Sensex: We said, "Trading above the candle's high of 9455 can test the upper end of the Green channel ... This could be the short term target/resistance for the Index." Up nearly 3% initially, the Index did touch the target, only to find its short-term resistance as argued. Retracing all the gains, it closed flat. Metals lost 3%. The A/D ratio ended negative.

The action formed an up day, but a bear candle with an upper shadow. This indicates hesitance at technical resistance near the upper channel and last month's high. However, it does not indicate a breakdown as yet, until we see a strong selling below its low at 9400. Holding 9400 can, therefore, encourage positive efforts, perhaps initially.

To see full report: OPENING BELL 250309

>Reliance Communications (ANAND RATHI)

Net-adds drop in February but still tracking in-line

■ 3.4m net-adds in February. This implies a decline of 32% from the record 5.0m reported in Jan, yet RCOM is on track to meet our 4QFY09 forecast of 11.2m net-adds; the company needs to add 2.8m subs in March, which is achievable in our view. Furthermore, our FY10 forecast of sustainable monthly net-adds for RCOM is 2.1m, coupled with a 14% yoy decline in the ARPU.

■ Why the sharp decline in monthly net-adds? Three reasons in our view: (1) 10% fewer days in Feb vs. in Jan, (2) Reduced attractiveness of the promotional GSM package – initial cost to the subscriber is Rs100-110 vs. Rs25-50 in Jan, also reduction in free talktime value to Rs4/day (for 90 days) vs. Rs5-10 previously and, (3) conscious effort on the part of RCOM to limit the supply/sale of promotional GSM SIM cards, especially in those circles where RCOM is close to qualifying for additional spectrum.

■ 4Q recovery thesis intact. A positive surprise on net-adds (vs. our 11.2m forecast) now appears unlikely, but the key is revenue growth. RCOM has been offering discounted tariffs to boost usage and has indicated that the trends in recharge and ‘paid’ minutes are better than their own expectations. Furthermore, prebooking of bulk of the network operating costs and control in ad expenditure should contribute to healthy EBITDA growth in 4Q.

■ We find RCOM stock attractive given potential recovery in revenue/EBITDA growth and inexpensive valuations (FY10 P/E of 7.7x). Key risks include irrational competition and 3G auctions.

To see full report: RELIANCE COMMUNICATIONS