Derivatives: Horizontal move with marginal upward bias expected

Market may continue its horizontal move with some positive bias, but progress of South West Monsoons, global market mood will guide the market either way



As seen from the signs during the previous week, the market continued its horizontal move although with some amount of volatility during the week ended 13th August 2010. For the week under review, the benchmark S&P Nifty rose 12.85 points to close at 5452.10 on Friday. All throughout the week the nifty managed to close above the 5400 levels which seem to have become an intermediate support level for the market as evident from the nifty option trend. There has been significant put writing of the nifty 5400 strike both on 12th and 13th August 2010. Similarly the nifty call options witnessed unwinding of calls wrote earlier thus indicating a slight upward bias for the benchmark going ahead. There was active open interest (OI) build-up across the nifty and stock future counter signifying a sustained bull tone amid concerns of some intermediate correction happening. The nifty August future closed at a premium of 4.35 points to the underlying at 5456.45. The OI in the nifty August future increased by 1.17 lakh shares on Friday as compared to the previous day to take the total OI to 3.35 crore shares. Significant nifty shorts were covered on Thursday, while on Friday fresh long additions were made. Similar was the trend in some of the front-line stock futures as well. The market seems to have consolidated well and digested the bad news on the domestic front quiet well during the past one week. Although the market has turned slightly upward bias, the fear of overvaluation and imminent correction remains.

Going ahead the market may continue its horizontal move with some positive bias as suggested from the trends in the F&O segment. In the mean time both the domestic economy indicators as well as the global market mood will be closely watched for required market stimuli either wa