Market would continue consolidation trend with bias remaining positive

Market would closely eye the developments in the parliament and any sign of rollback in reforms announced so far would be very negative for the market… even otherwise the market is expected to consolidate further with strong resistance above 5700 levels Amidst all the worries, the Indian markets rose during the week ended 23rd November 2012 in anticipation of various reform announcements during the winter session of the parliament that started on Thursday. So despite the US fiscal cliff worry and the threat of no-confidence motion by the opposition in India, the benchmark nifty rallied by 52.55 points during the week under review to close at 5626.60 on Friday. Perhaps the market expect the fiscal cliff issue to be sorted out without much hiccups, while the failure of the Trinamool Congress party (TMC) to pass the no-confidence motion against the government would bode well in the short term. Besides this, the government's move to rekindle the primary market is seen as renewed effort by the government to achieve its divestment targets. So the increase in LIC's investment limit in listed companies to 25% just ahead of the beginning of Hindustan Copper share auction is a sign that perhaps more such public issues are in the offing. Some of the global macro numbers like the Chinese PMI numbers and the US jobless claim showed some encouragement. So the macro both in India as well as in other major markets appears good. But the continued depreciation of the rupee against the dollar is a bit of worry. Besides continued adjournment of the parliament is also causing concerns that the winter session of the parliament could be a washout just like the monsoon session, so no major business would be transacted. Nevertheless the market would continue consolidation trend with bias remaining positive. In the futures and option (F&O) segment, the index and stock futures segment of the November series witnessed shedding of OI, while the nifty option segment of the next month witnessed bullish buildup. The nifty future of the November series overall shed 22.77 lakh shares in open interest (OI) to take the total OI to 1.28 crore shares. The Bank Nifty future of the November series shed 66k shares in OI to take its total OI to 10.91 lakh shares. However the nifty future of the December series added 17.57 lakh shares in OI to take its total OI to 33.54 lakh shares. The trend was similar in some of the major stock futures segment as well as most of them shed OI in the November series while adding OI in the December series. Some bit of indecisiveness was definitely evident as the nifty call option of the December series till 5700 strike witnessed OI addition due to buying while the strikes above 5700 witnessed addition of OI due to writing. On the other hand the put option till 5700 witnessed writing, indicating huge resistance at above 5700 levels. The average volume during the week under review remained higher at Rs 124784.98 crore as compared to Rs 91264.26 crore during the previous week. The put-call ratio of index options on Friday was lower at 0.98 as compared to 1 the previous day. The stock put-call ratio was higher at 0.55 as compared to 0.54 the previous day. The market wide put-call ratio on Friday remained unchanged at 0.95 as compared to the previous trading day. Open Interest (OI) break-up as on 23rd November 2012 5700 strike call option of the November series added 6.6 lakh shares in OI due to aggressive writing to take its total OI to 87.69 lakh shares, while other strikes witnessed unwinding of call bought earlier. 5500, 5600 and 5700 strike put option of the November series shed 7.29 lakh shares, 9.23 lakhs shares and 2.63 lakh shares in OI as put wrote earlier at these strikes were covered. On the other hand the 5700, 5800 and 5900 strike call option of the December series witnessed addition of 2.6 lakh shares, 1.88 lakh shares and 3.31 lakh shares in OI to take their respective total OI to 24.30 lakh shares, 27.36 lakh shares and 18.82 lakh shares respectively. OI addition in the 5700 strike was due to buying, while the OI additions above these strikes were due to aggressive writing indicating strong resistance above 5700 levels. (See the most active nifty option table) Open Interest (OI) of major November 2012 series stock futures as on 23rd November 2012