Edelweiss - Daily PCG Call

Market Snapshot

The Sensex opened with a negative gap and moved in positive with fresh buying at lower levels and touched a high of 14,313. The index, however, could not hold gains and slipped again in late noon deals. The Sensex finally settled with a loss of 65 points at 14,188 while Nifty lost 11 points to 4,096.

The NSE & BSE cash volumes were slightly better compared to the previous day at INR 84 bn and INR 40 bn. The F&O volumes were significantly higher compared to the previous day at INR 484 bn.

Sentiment Indicators

The Implied Volatility (IV) across Nifty strikes has remained unchanged at 26-29% levels. The WPCR of Nifty Options decreased to 1.08 compared to the previous day while the 5 day average is 1.17. The February futures are now trading at 5 points premium. The Nifty Futures OI has decreased by 1%.

Outlook

The market is expected to open positive inline with its Asian peers and remain volatile as Feb derivative contracts expire today. We recommend cautious approach before the annual budget.

The market wide rollovers are at 60%, which is in-line with previous expiries. Nifty rollover continues to see healthy shift to March contracts at 60% on the eve of expiration. However, the roll cost has been lower at around 62 bps, about 10bps lower than previous expiries.

On Nifty rolls, we expect short rollers to continue to be aggressive and levels are expected to contract to -6 to -8.

For VWAP trades, we expect Bharti, NALCO to be good counters for long position and BHEL, TVS Motors, IDFC, MTNL, BILT, HLL on the short side. We will be sending a detailed list of VWAP buy/sell counters throughout the day.

The Nifty is currently skewed between a small range at an immediate support of 4080 and 4047 and resistance of 4125 and 4165. A close above 4165 would trigger a break out on the upper side of the ascending triangle while a close below 4080 would turn the Nifty bearish.

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Thanks Yash