The Hindu Business Line : Volatile condition may prevail

Reliance was the most active among the individual stocks. Contracts on SBI, Tata Motors, Tata Steel, Satyam, Infosys, TCS and ACC were the most active contracts.

TRADING activity on the NSE remained robust last week; the average daily turnover was Rs 10,734 crore against the previous figure of Rs 11,677 crore. The week also witnessed a huge build-up in open interest positions on Nifty, particularly on Friday.

Nifty outlook: Last week, we had cautioned our readers to be wary of the market direction. In line with our expectation, the Nifty did not show any clear direction, yo-yoing on each passing day. In the process, the Nifty failed to hold on to the psychological 2,000-mark.

For the week ahead also, the Nifty may rule in uncertainty zone or volatile zone.

As signals from sentiment indicators such as implied volatility, put/call ratio and cost-of-carry are mixed, we advise traders to tread cautiously. One of the key trends that observed in the current market - index management - was witnessed last week also, albeit to a lesser extent.

In this backdrop, we advise traders to adopt extreme caution with adequate stop-loss in place while indulge in dealings.

Volatility view: The implied volatility (IV) of Nifty calls improved, inched up marginally to 19 per cent against last week IV of 17 per cent; the same for puts also improved, jumped to 22 per cent from the previous week levels of 18 per cent.

Implied volatility is the perceived volatility in the index during the coming weeks; the gain in the implied volatilities for both puts and calls suggests that traders are not sure of market direction. The annualised volatility on Nifty is 17.14 per cent.

Put/call ratio: The volume-wise PCR increased to 0.99 from previous week levels 0.74; the same on open positions basis remained firm around 1.2 (1.12).

This suggests that a lot of traders are keeping their put positions open as a hedge against any drastic fall in Nifty. Quite a few traders seemed to have closed their calls positions when the market moved up during the week to book profits.

The firmness of PCR above one-point mark indicates the possibility of weakness in Nifty.

Also, the Nifty saw a build-up in OI positions in call options, indicating huge call writing. This indicates a downward bias of the market.

Basis: The Nifty December futures once again turned into negative zone vis-à-vis Nifty index; it now trades at a discount of 1.8 points to the spot close. Cost-of-carry also turned into negative zone. These indicate a negative signal, as traders are not willing to pay premium to carry over their positions.

Index movement: Last week, the Nifty opened flat at 1996.30 but immediately turned positive to register an all-time high of 2012.15; but the Nifty closed at 1969, a loss of over 1.36 per cent over the previous week close.

Nifty futures: The Nifty December closed at 1967.20 against the spot close of 1969, discount of 1.8 points; Last Nifty December futures closed at 1997.35. The open interest positions, though improved week-on-week basis, the build-up was not a smooth one; OI positions improved to 61,694 contracts from the previous week levels of 56,473 contracts. But the Nifty December futures shed some positions on Wednesday and Thursday.

The Nifty January futures closed at 1968.45 against the previous week close of 1996.40. Open interest positions improved to 1,905 contracts (1,164 contracts).

Stock futures: Reliance was the most active among the individual stocks. Contracts on SBI, Tata Motors, Tata Steel, Satyam, Infosys, TCS and ACC were the most active contracts.

* Contracts on auto stocks added open interest positions while a few others such as BHEL, HDFC, MTNL, Nalco and ONGC saw some shedding in open interest positions during the week.

* Most (Index heavyweights) December futures contracts are ruling around their respective spot closes, indicating a range-bound movement for them.

* A few contracts such as Grasim, Hindalco, Reliance, Tata Tea, Mastek and HDFC are ruling in premium to their respective spot price at Friday's close.

* On the other hand, futures on BPCL, i-flex Solutions, HPCL, Ranbaxy and BHEL are quoting in discount.

* Implied volatility on major index heavyweights increased for both calls and puts indicating, which once again venting mixed signal thus indicating volatile outlook for Nifty.

* Put/call ratio for most index heavyweights jumped sharply both on open-positions wise and on volume basis. This indicates that a lot of puts positions were kept open in anticipation of a slide on them.

Mock trading: The NSE is conducting a mock trading session in the F&O segment on Saturday. The trading timings for the mock trading would be between 10.30 a.m. and 12.30 p.m., the NSE statement said.

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