Derivatives: Index to move horizontally in the absence of any trigger

Trends in F&O segment indicate horizontal move with negative bias for the market; waits for triggers in the domestic and global markets to find direction



The market began the week on a high note although the market corrected marginally towards the end of the week ended 6th August 2010 primarily due to profit booking. Overall for the week under review the nifty rose 71.65 points to close at 5439.25. 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 3.2 points to the underlying at 5442.45. The OI in the nifty August future increased by 32.31 lakh shares and the total OI on Friday stood at 3.10 crore shares although on Friday there was some shedding of OI in the nifty August future. Similar was the trend in most of the front-line stock futures as well. In the nifty option front as well the out-of-the money call option was seen adding OI due to aggressive buying, while both out-of-the-money and in-the-money put options witnessed addition of OI due to writing thus indicating that the market may rise from this level further. However on Friday the 5400 strike call added 6.57 lakh shares in OI due to call writing while at the same time the 5300 and 5400 strike puts shed OI that was written earlier, thus indicating some cautiousness. Although the trend may seem bullish, the fear of correction may keep the moment in the index horizontal for some time. In a scenario of horizontal move any positive or negative market news may act as the trendsetter either way.

The average volume in the futures & option (F&O) segment during the week under review was Rs 62483.24 crore. Some of the stock futures added aggressive OI during the week under review. For e.g. Reliance august future added 34.51 lakh shares in OI while Tata Steel, Tata Motors, Infosys, ICICI Bank and SBIN future of the same series added 1.62 lakh shares, 24.71 lakh shares, 3.23 lakh shares, 36.16 lakh shares and 8.44 lakh shares in OI during the week under review. The OI in all these counters stood at 2.53 crore shares, 2.05 crore shares, 1.01 crore shares, 29.70 lakh shares, 2 crore shares and 57.16 lakh shares respectively.

The market going ahead may maintain a horizontal move with negative bias as suggested from the trends in the F&O segment. Any positive or negative triggers both domestically as well as internationally will play a key role in establishing direction.