Market to remain volatile

The market may remain tentative ahead of the derivatives expiry on Thursday. The last few days have been choppy as the buying by domestic institutional investors was negated by the FII selling in both the cash and derivatives markets.

The signals on the derivatives front are mixed. The open interest in Nifty futures rose by 20 per cent to 34 lakh shares from 28 lakh shares last week. The PCR has been sliding and is currently 0.77 against 1.05 last week. This points to an oversold situation as more calls rather than puts are being written. But the implied volatility is still hovering around 30, which is higher than average, with both calls and puts trading at a premium. Implied volatility, which reflects expectations about future volatility, is lower when investor sentiment is bullish and tends to rise as bearishness and caution sets in.

There has been build-up in 5900 call options, which account for open interest of 26 lakh shares as on date. The open interest in the 6000 call options stands at 21 lakh shares. As far as the put open interest is concerned, the 5500 put saw a build-up of 20 lakh shares, while the figures for the 5600 put stood at 15 lakh shares. This demonstrates a wide trading range, in the immediate future.

Autos and FMCG stocks were the top gainers last week, whereas fertilisers and refinery stocks gave up some of their gains after the stupendous rally seen earlier.

Keep a watch on Escorts, Tata Tele and GMR as there was a huge build-up in open positions on these counters.