• Investment World
• eWorld
• Catalyst
• Mentor
• Life
• Canvas
• Praxis
• Urban Pulse
• Brand Quest

K.S. Badri Narayanan

The narrowing down in backwardation in Nifty futures also indicates a positive bias.

Nifty outlook: Last week, we had anticipated the possibility of short-term trend reversal and had recommended shorting Nifty June futures if the spot Nifty dips below 2047 levels. The Nifty was volatile but remained firm and did not breach the 2047 levels.

This week, the Nifty remains at critical levels though indicators such as cost-of-carry and implied volatility present bullish undertone. If the Nifty (spot) sustains momentum and breaches 2100 levels, it can go close to all-time high levels. On the contrary, if it dips below 2065 levels, it could touch 2000-1990 levels.

Strategy: Investors may consider buying the Nifty 2150 June calls @ Rs 10.75 and 2050 puts @ 29.15.The Nifty June futures closed 2075.85 on Friday.

Volatility view: The implied volatility of puts and calls witnessed a divergent trend. While the puts IV declined sharply to 15 per cent from the previous week levels of 22 per cent, the calls IV jumped to 17 per cent (10 per cent).

Implied volatility is the perceived volatility in the index during the coming weeks; the firmness in calls IV indicates that traders are betting on a market upside. The weakness in puts IV indicates that not many are betting on market downturn.

However, the annualised volatility levels remained firm at 21.71 (above the implied volatility levels) indicating the possibility of the Nifty moving to the volatile zone.

Put/call ratio: The volume-wise put/call ratio on Nifty remained firm at 0.94 (0.94) and open interest-wise at 1.27 (1.11). The firmness in open interest of PCR paints a negative picture as traders have kept their long puts positions open in anticipation of a decline in Nifty.

Backwardation: The discount of the Nifty futures has narrowed down sharply; the Nifty June futures now trails the Spot Nifty by a whopping 18.4 points against the previous week difference of 28.95 points.

The narrowing down in backwardation in Nifty futures also indicates a positive bias for the Nifty as more players seemed to have gone long.

Cost-of-carry: The cost-of-carry paints a negative picture.

(The opinion expressed in this column is based on technical analysis. There is risk of loss in trading.)

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Women's Accounts

Copyright © 2005, The Hindu Business Line. Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu Business Line