Weekly view: Some pullback may be seen if Nifty recovers above 8720… Research analysts Amit Gupta Azeem Ahmad Raj Deepak Singh [email protected] [email protected] [email protected] February 6, 2015 Weekly Recommendations… Deal Team – At Your • Service Infosys Ltd (INFTEC) Buy INFTEC February Future in the range of | 2200-2220. Target | 2450 Stop loss | 2092 Rationale: In the recent declines, technology stocks have shown significant resilience and outperformed the Nifty. Despite broader market weakness, Infosys gave its all-time high closing in the last session. This move has triggered closure of positions at its highest Call base of 2200 strike. Since December, near 30% open interest has been closed in Infosys futures. Looking at the short covering trend in both futures & options segment, we believe Infosys is likely to move towards | 2450 in the days to come. Last week recommendations follow up Date Underlying 30-Jan-15 WIPRO View Strategy Reco Target Bullish Buy Future 613 665 2 SL Profit/Loss 574 19500 Comment Profits booked The Week Gone By… Bank drags belowService 8700… DealNifty Team – Nifty At Your • The Nifty traded on a weak note for the entire week and witnessed continuous selling pressure. Apart from technology and FMCG space, all other sectors came under pressure while banking stocks took the most plunge • During the week, the banking index lost almost 5% against 1.7% drop in the Nifty. The Bank Nifty also breached its January 15 lows making it a more than 10% decline from the top of 20900 levels • The market breadth also remained under severe pressure throughout the week due to broader market weakness. The market breadth has turned positive only once since January 20, 2015 • India volatility index remained above 20 throughout the week and is unlikely to come down in the near term due to upcoming Budget and result announcements • In the week, major Nifty gainers were Cairn India (9.13%), HCL Tech (9.1%), Wipro Ltd (6.1%), Hindalco (5.4%) and Sesa Sterlite (4.3%) • On the other hand, Nifty losers of the week were Jindal Steel & Power (-10.5%), Punjab National Bank (-10%), Bhel (9.5%), M&M (-9.1%) and Bank of Baroda (-8.9%) Nifty highlights Week on week Spot Fut COC(%) Tot Fut OI PCR OI PCR Vol ATM IV (%) Current 8661 8712 10.7 52681600 0.89 0.97 18.7 Previous 8809 8872 6.2 52865050 0.96 1 19.8 Change (%) (1.7) (1.8) - (0.3) - - - 4 Outlook for coming week… Highest Put base of 8500 major support…however, on higher side, some pullback may be seen if Nifty recovers above 8720… • The Nifty was dragged by almost 150 points during the week and due to lack of buying support continued to slide. It ended the week near the lows • Lower-than-expected results from banking stocks was the primary reason behind the recent sell-off. Stable global cues were also unable to help the index and it was unable to sustain any intermediate recovery • OTM Call strikes witnessed continuous writing during the week and Call 8800 and 8900 strikes added more than 15 lakh shares each during the week. The decline in PCR-OI from 0.96 to 0.89 also indicates the same. However, the major Put base was formed at the 8500 strike with more than 30 lakh shares, which is likely to act as major support for the Nifty on declines • On the higher side, sustainability above 8720 may induce some recovery towards 8900. We continue to believe that upward bias should be maintained in the technology space, which is likely to outperform the Nifty in the current consolidation Nifty Options build-up for February Series… 14 Call OI 12 Put OI 10 6 4 2 6 9200 9100 9000 8900 8800 8700 8600 8500 0 8400 OI in Millions 8 Bank recovery only if it takes out 19200… DealNifty Team – Atlikely Your Service • The Bank Nifty witnessed a fall of over 1000 points for a second consecutive week. Both PSU and private banking stocks remained under pressure during the week • The RBI move on keeping key rates unchanged added more pressure to the index • The index added over 22% in open interest since last Friday with the 9% fall, which clearly indicates formation of short positions • The current price ratio of the Bank Nifty/Nifty has breached the important level of 2.20. Below this it is likely to retest the levels of 2.14-2.12 indicating that the banking stocks are likely to underperform • The Bank Nifty has closed below the highest Put base of 19000. It means the Bank Nifty may witness some more selling pressure towards previous consolidation price of 18400 if it does not recover above 19200 soon Bank Nifty options build up for February Series Call OI 350000 Put OI 300000 250000 200000 150000 100000 50000 7 19500 19400 19300 19200 19100 19000 18900 18800 18700 18600 18500 0 FIIs flows remain muted in cash and index futures but stock futures segment witnesses fresh Deal Team – At Your Service shorting… • Post the sharp rally, FIIs have taken out over US$130 million from the equity segment during the week. Even though banking stocks corrected significantly and the Nifty also declined nearly 4% from its recent peak, figure of outflows remained low compared to the amount they poured in the second half of January. On the other hand, they continued to favour India’s debt segment as they parked in over $760 million. Despite profit taking in the equity segment, inflows in the debt segment kept the INR resilient against the US dollar • In the index futures segment, FIIs created fresh short positions by keeping maximum exposure in banking pack. They created fresh shorts of well over US$135 million during the week. In stock futures, their stance remained more bearish as they built short positions of over US$650 million in the last five trading sessions. This led to a sharp decline in many index stocks with a major fall observed in PSU banks. In Index options segment, FIIs remained buyers, which suggests creation of some hedging positions against long portfolios • Among EM equities, FII activity remained mixed in nature, where they remained sellers in countries like India and Turkey, while on the other hand Philippines, Thailand and Taiwan witnessed inflows from FIIs FII & DII flows FII Date DII Index Fut Stock Fut Index Opt Cash 30-Jan 11.67 -260.53 213.47 28.82 -5.99 2-Feb -0.55 -305.57 124.63 -94.99 -36.28 3-Feb -76.81 -251.02 110.00 -7.00 -22.19 4-Feb 35.72 -142.04 46.22 -3.44 -11.66 5-Feb -93.2 44.5 118.4 NA 52.74 * FII and DII’s net figure is in million USD as per provisional data 8 Cash Dax likely to move of 11500… Deal Team – Attowards Your target Service S&P 500: S&P to trade with positive bias with support at 2000 S&P Index In the first five sessions of February, the S&P has bounced sharply and covered January’s decline completely. Despite below expected trade deficit numbers, S&P remained strong above 2050. The highest Put base at 2000 strike has expectedly given support to the index and is likely to remain an important support in the coming days. Also, sustaining above 2050 could allow the index to extend its rally towards its highest Call base of 2100. On the lower side, the 10-month moving average, which had supported the entire rally of S&P since it moved up from 1370 levels, is currently placed at 2000 levels Call OI Put OI 7 6 5 OI Millions 4 3 2 1 Dax: Dax likely to move towards 11500: After breaching the 9 Dax Index 120 100 80 60 40 20 Call OI Put OI 11000 10900 10800 10700 10600 10500 10400 10300 10200 0 10100 key hurdle of 10100, the Dax added over 9% gains making an up move of nearly 17% from the bottom of 9380. Sustaining above 10000 led to a short covering rally, which ultimately took the index to all-time highs of 10980. During the month, the euro stabilised near 1.12 levels post reactive decline on ECB’s stimulus announcement. As the ECB is likely to carry on with its stimulus plan, the euro may continue to remain subdued in the coming days. The options structure displays highest Call and Put concentration at 10700 strike. The current move of the Index looks to be taking a breather near its recently formed highs. We may see a test of a key support of 10700-10550 in the coming days, which could be utilised for entering longs for target of 11500 2100 2090 2080 2070 2060 2050 2040 2030 2020 2010 2000 0 OI in Thousands • 8 10000 • US$INR: US$INR–toAt trade in theService range of 61.3-62.7 Deal Team Your • In the February series, the open interest concentration continued between 62 and 62.5 Call strikes with both having build-up of over 1.60 lakh contracts. Last week writers managed to maintain their upper hand and kept the currency pair below 62 levels. On the other hand, 62 Put strike has witnessed noticeable increase in OI with premium of 70 paisa and the same now carries highest OI of over 1.2 lakh contracts. This set up suggests range bound biased in US$INR for near future. • The currency pair traded in a narrow range throughout the week witnessing some short additions towards the end of week. Also, in the last few sessions, we observed a shift of short positions from near month to March series, which we believe is a cautious stance taken by participants prior to major forthcoming event of Union Budget. • The dollar index seemed to have met resilience near recent highs of 95. Also below expected trade deficit data from US forced the index to cool off towards 93.5 in later part of the week. This too has allowed INR to stabilize near 62. • Following weak sentiments among global equities, FIIs have pulled out some funds from equities in last week. Though inflows in India’s debt segment were continued as they pour in over | 2300 crore during the week. This has offset outflows from equities and restricted INR from depreciating against US$. • The overall scenario illustrates that US$INR is likely to trade in the range of 61.3-62.7 in coming days with FIIs flows remains key factor in both equity and debt segments US$INR February series options build-up US$INR future price and OI Chart 63 62 61 60 59 58 Open Interest US$INR 4-Feb 30-Jan 27-Jan 21-Jan 16-Jan 13-Jan 5-Jan 8-Jan 31-Dec 26-Dec 22-Dec 17-Dec 9-Dec 12-Dec 4-Dec 1-Dec 21-Nov 26-Nov 18-Nov 57 13-Nov 65.50 65.00 64.50 64.00 63.50 63.00 Put OI 64 5000 4500 4000 3500 3000 2500 2000 1500 1000 500 10-Nov Call OI 62.50 62.00 61.50 61.00 60.50 60.00 59.50 59.00 OI in Thousands 180000 160000 140000 120000 100000 80000 60000 40000 20000 0 Stock …. Service Deal Futures Team Scanner – At Your Long build-up Short build-up Current OI CMP Canara Bank 7947 417.7 40.73% -6.40% 5.53% Crompton Greav 19124 160.15 40.56% -16.02% 9.50% 5.27% Yes Bank 17392 814.25 38.01% -6.05% 115.15 7.12% 4.30% M&M 20268 1157.4 35.70% -9.16% 721.85 5.64% 1.88% Havells 6871 245.95 26.40% -5.46% Stock Current OI CMP Dabur 2296 274.3 21.87% 6.24% Wipro 17110 644.9 12.09% Jubilant Foods 9357 1472.35 HDIL 6286 Ranbaxy 26645 Stock % Chg in OI % Chg in price Long closure Stock % Chg in OI % Chg in price Short covering Current OI CMP UPL Ltd 4528 430.95 -24.52% 16.52% -6.18% Cairn 11946 254.75 -19.54% 8.70% -10.62% -12.34% Bharat Forge 14030 1059 -19.35% 1.80% 185.8 -10.34% -0.43% HCL Tech 24049 1965.6 -14.79% 9.27% 113.35 -10.15% -3.94% Sesa Sterlite 23327 211.25 -7.99% 3.94% Current OI CMP JSW Energy 5784 102.75 -17.41% -15.85% India Cem 10478 101.75 -15.42% Apollo tyres 5573 214.25 Exide Ind 3531 Syndicate Bank 6632 Stock % Chg in OI % Chg in price 11 % Chg in OI % Chg in price Stock Deal options TeamOI– activity…. At Your Service Top liquid stock options High Call Base Calls Calls Stock Expiry Strike OI in Contract % Chg in OI Stock Expiry Strike OI in Contract % Chg in OI IOB 26-Feb 52.5 192 2300 INFY 26-Feb 2160 50 -76 JUBLFOOD 26-Feb 1450 220 1733 WOCKPHARMA 26-Feb 1100 33 -48 TATAGLOBAL 26-Feb 157.5 240 1400 WIPRO 26-Feb 630 118 -42 UCOBANK 26-Feb 70 608 1167 ONGC 26-Feb 390 612 -34 RCOM 26-Feb 75 384 473 ITC 26-Feb 365 80 -30 High Put Base Puts Puts Stock Expiry Strike OI in Contract % Chg in OI Stock Expiry Strike OI in Contract % Chg in OI HCLTECH 26-Feb 1950 113 5550 HDFCBANK 26-Feb 990 7 -73 WIPRO 26-Feb 640 48 4700 SSLT 26-Feb 215 11 -58 IOB 26-Feb 50 1060 464 HDIL 26-Feb 115 12 -57 BPCL 26-Feb 760 90 329 TECHM 26-Feb 2750 6566.666667 616 IDFC 26-Feb 180 137 -48 IOB 26-Feb 55 104 -36 12 Forthcoming during the week … Deal Team –Events At Your Service • • • • • India: 09 Feb : GDP and Quarterly Result of DLF, L&T and Bank of India 10 Feb : Import-Export Numbers and Quarterly Result of Motherson Sumi and Aditya Birla Nuvo 11 Feb : Quarterly Result of PFC, BPCL and Power Grid 12 Feb : Industrial Production, CPI and Quarterly Result of Coal India, Reliance Capital, BHEL, Cipla, ONGC, Hindalco and Glenmark Pharma 13 Feb : Quarterly Result of United Breweries, SAIL, OFSS, SBI, M&M, Bosch, REC, HPCL, Reliance Communications and Eicher Motors • • • • US: 11 Feb : MBA Mortgage Applications 12 Feb : Monthly Budget Statement and Initial Jobless Claims 13 Feb : University of Michigan Expectations • • Euro zone: 12 Feb : Industrial Production 13 Feb : Trade Balance & GDP • • • Japan: 09 Feb : BoP Current Account Balance and Trade Balance 10 Feb : Tertiary Industry Index MoM 12 Feb : PPI and Machine Orders • • • China: 08 Feb : Trade Balance 10 Feb : CPI, PPI • • • UK: 10 Feb : Industrial & Manufacturing Production 10 Feb : NIESR GDP Estimate 12 Feb : RICS House Price Index & BoE Inflation Report • • • • Germany: 09 Feb : Trade Balance & Current Account Balance 12 Feb : CPI 13 Feb : GDP and WPI Portfolio allocation in Derivatives Products… • • • • • It is recommended to spread out the trading corpus in a proportionate manner between the various derivatives research products Please avoid allocating the entire trading corpus to a single stock or a single product segment Within each product segment, it is advisable to allocate equal amount to each recommendation. For example: The ‘Daily Derivatives’ product carries two intraday recommendations. It is advisable to allocate equal amount to each recommendation Stock Trader & Quant Picks recommendations should be considered in cash segment and stoploss on closing basis. Time frame for these recommendations is 3 month. Allocation Products Return Objective Product wise Max allocation allocation per stock Frontline Mid-cap Number of Calls Stocks stocks Duration Daily Derivatives 5% 2-3% 2 Stocks 1% 2-3% Intraday Weekly Derivatives 10% 3-5% 2 Stocks 3-5% 5-7% 1 Week High OI stock 5% 2-3% 2-3 Stocks 5-7% 7-10% 1-2 Weeks Monthly Derivatives 15% 3-5% 4-7 Stocks 7-10% 10-15% 1 Month Global Derivatives 5% 2-3% 1-2 index strategy - - 1 Month Stock Trader/ Stock in Focus 15% 2-3% 5-6 Stocks 7-10% 10-15% 3 Months Quant Picks 10% 2-3% 2-3 Stocks 7-10% 10-15% 3 Months Alpha Trader 5% 2-3% 2-3 Alpha strategy 5% - 3 Months Volatility Insights 5% 2-3% 1-2 Strategy 8-10% 10-15% 1-2 Month Arbitrage Opportunity 5% 2-3% 2-3 Stocks > 2.5% >2.5% Event Based Positional / Daily Futures 5% 2-3% 8-12 Stocks 1-3% 2-5% 1-14 days Index option & Strategy 5% 3-4% 2-5 Nifty 2-3% - 1-14 days Stock option & Strategy 5% 3-4% 2-8 Stocks - 3-5% 1-14 days Currency Futures 5% 3-4% 3-5 Calls - - Intraday 14 Pankaj Pandey Head – Research [email protected] ICICIdirect.com Research Desk, ICICI Securities Limited, 1st Floor, Akruti Trade Centre, Road no.7, MIDC Andheri (East) Mumbai – 400 093 [email protected] 15 Disclaimer ANALYST CERTIFICATION We /I, Amit Gupta B.E, MBA (Finance), Raj Deepak Singh BE, MBA (Finance), Azeem Ahmad MBA (Fin) Research Analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our views about the subject issuer(s) or securities. 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