Technical Picks | October 13, 2012

Infy disappoints but market holds 5640

Sensex (18675) / Nifty (5676)
The week began on a muted note, in-line with mixed global cues. The week's price action can be perfectly described as a 'See-Saw' between the bulls and the bears. We had mentioned a negative crossover of daily 'RSI' and 'Stochastic' oscillators. As a result, the indices traded with a negative bias and precisely tested the mentioned support zone (18582 - 18542 / 5635 - 5624) of '20-day EMA' and '5-week 18582 5624 EMA'. A sharp bounce on Thursday's session in anticipation of decent Infosys Q2 numbers and favorable IIP data was met with resistance as Infosys once again failed to deliver the goods. During the week, most of the sectors ended in the negative territory, out of which, realty, oil & gas and IT stocks were among the major draggers. Conversely, the defensive sectors like, FMCG and healthcare defended the markets. The Sensex ended the week with a loss of 1.39%, whereas the Nifty lost 1.23% over the previous week's closing.
Source: Falcon

Exhibit 1: Nifty weekly chart

Bearish Engulfing

Exhibit 2: Nifty Daily chart

Pattern Formation
The '20-day EMA' and the '20-week EMA' are placed at 18582/ 5635 and 17840/ 5400 levels, respectively. The monthly 'RSI' oscillator is moving higher from the 50 mark and the positive in ADX (9) indicator is intact. The weekly 'Stochastic' oscillator is now signaling a negative crossover. The weekly chart depicts a 'Bearish Engulfing' candlestick pattern. The 38.2% and 50% Fibonacci Retracement levels of the rise from 17250 to 19138 / 5216 to 5815 are placed at 5515, 18416 / 5586 and 18194 / 5515 respectively.
Source: Falcon

confirmation in the form of a closing below the low of the candle. While the intermediate trend continues to be bullish, this candlestick pattern signifies a near term pause to the rally. Also the negative crossover in the weekly 'Stochastic' oscillator does not bode well in the short term. Hence, we are of the opinion that if indices sustain below last week's low of 18581 / 5636 5636, then further price erosion can be expected. In this process, the market may slide towards 18416 / 5586 and 18194 / 5515 5515, which are 38.2% and 50% Fibonacci Retracement levels of the rise from 17250 to 19138 / 5216 to 5815 respectively. 5815, Aggressive bears can encash the small down move with a strict stop loss above 18886 / 5729 level and the bulls are advised to stay away until they get any reversal signs. The said pattern will be negated once the indices manage to cross the high of the candle i.e. 19138 / 5816 In this case, we expect the indices 5816. to move towards 19542 - 19812 / 5850 - 5945 levels.

Future Outlook
As mentioned in our earlier reports, our benchmark indices, the Sensex and the Nifty, are now undergoing a 'Time-Wise correction' or in simple words, going through a consolidation or corrective phase. In the longer run, a correction / consolidation phase is a healthy sign and lays the foundations for the next impulsive up move. The weekly chart now depicts a 'Bearish Engulfing' candlestick pattern. This pattern needs a

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Technical Picks | October 13, 2012

Weekly Pivot Levels For Nifty 50 Stocks

SCRIPS
SENSEX NIFTY BANKNIFTY ACC AMBUJACEM ASIANPAINT AXISBANK BAJAJ-AUTO BANKBARODA BHARTIARTL BHEL BPCL CAIRN CIPLA COALINDIA DLF DRREDDY GAIL GRASIM HCLTECH HDFC HDFCBANK HEROMOTOCO HINDALCO HINDUNILVR ICICIBANK IDFC INFOSYSTCH ITC JINDALSTEL JPASSOCIAT KOTAKBANK LT LUPIN M&M MARUTI NTPC ONGC PNB POWERGRID RANBAXY RELIANCE RELINFRA SBIN SESAGOA SIEMENS SUNPHARMA TATAMOTORS TATAPOWER TATASTEEL TCS ULTRACEMCO WIPRO R2 19,130 5,803 11,674 1,567 223 3,999 1,187 1,799 816 283 272 367 337 385 371 248 1,757 425 3,516 605 765 646 1,852 129 588 1,084 167 2,698 292 439 102 648 1,709 600 890 1,439 182 294 867 124 554 874 559 2,410 181 772 752 292 108 438 1,338 2,141 382 R1 18,902 5,740 11,531 1,533 219 3,949 1,153 1,772 797 272 259 359 332 375 365 233 1,721 403 3,452 593 753 639 1,815 123 582 1,065 159 2,547 288 428 97 638 1,679 583 872 1,405 175 286 844 122 547 847 537 2,331 177 730 733 282 105 430 1,318 2,093 367 PIVO PIVOT 18,742 5,688 11,388 1,475 213 3,885 1,119 1,740 776 265 250 355 329 366 359 223 1,698 372 3,356 575 744 627 1,795 119 570 1,054 154 2,429 281 422 90 631 1,635 561 858 1,376 168 280 815 119 537 827 518 2,261 173 705 709 273 101 418 1,296 2,027 358 S1 18,515 5,625 11,245 1,441 209 3,835 1,085 1,712 757 254 237 347 324 355 353 208 1,662 350 3,292 563 732 620 1,759 114 563 1,034 146 2,278 277 411 85 621 1,606 544 840 1,343 161 272 791 116 529 799 495 2,182 169 662 690 263 99 409 1,276 1,978 343 S2 18,354 5,573 11,102 1,384 204 3,771 1,050 1,681 737 247 228 342 321 347 347 197 1,639 320 3,196 545 723 609 1,739 110 551 1,023 140 2,160 270 405 78 614 1,562 522 825 1,314 154 267 762 113 519 780 476 2,112 165 637 666 255 95 397 1,254 1,912 334

Technical Research Team

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Derivatives Review | October 13, 2012

Resumption of momentum may take time

Nifty spot closed at 5676.05 this week, against a close of 5746.95 last week. The Put-Call Ratio has decreased from 1.06 to 0.98 levels and the annualized Cost of Carry is positive 5.19% The Open Interest of Nifty Futures decreased by 5.28% 5.19%. 5.28%.

Put-Call Ratio Analysis

PCR OI has decreased from 1.06 to 0.98 levels. The reason for decrease in ratio was mainly due to significant amount of buildup observed in 5700-5900 call option which was mix of long and short both and simultaneously 5300 and 5800 put option has seen decent unwinding. In put option 5600 strike price has seen maximum buildup in last week. Highest buildup in open interest in call option is at 5800 strike price, while in put option 5600 strike price has the maximum open positions as of now.

Implied Volatility Analysis

Implied Volatility (IV) for NIFTY has decreased a bit from 15.24% to 15.05%. Historical volatility (HV) is at 17.83% and that for BANKNIFTY is trading at 26.15%. Liquid counters having very high HV are UNITECH, NCC, PANTALOONR, IBREALEST and IVRCLINFRA. Stocks where HV are on lower side are HDFCBANK, ASIANPAINTS, TATACHEM, IOC and BAJAJ-AUTO.

Open Interest Analysis

Total open interest of market has increased from `1,40,695/crores to `1,54,767/- crores. Stock futures open interest has increased from `34,170/- crores to `35,136/- crores. Some of the big names which added open interest are WIPRO, JPASSOCIAT, INFY, RELIANCE and MARUTI. Open interest was shed in large cap names like PNB, RANBAXY, SESAGOA, HDFC and M&M.

Cost-of-Carry Analysis
Nifty futures closed at a premium of 10.50 point against the premium of 29.60 points to its spot. Next month future is trading with premium of 42.30 points. Liquid counters where CoC is high are WELCORP NHPC, ALOKTEXT, GVKPIL and DABUR. , Stocks with negative CoC are SUZLON, JPASSOCIAT, HCLTECH, CROMPGREAV and INFY.

Derivative Strategy
Scrip : RELIANCE View: Mildly Bullish Buy/Sell BUY SELL SELL
BEP - `877/Max. Risk: Unlimited
If RELIANCE continues to move above BEP .

CMP : `821.80

Lot Size : 250

Exercise Date (F & O) : 25th. Oct. 2012 Expected Payoff

Price Closing Price (` (`) Expected rofit/Loss Profit/Loss

Strategy: Long Call Ladder Scrip RELIANCE RELIANCE RELIANCE Strike Price 820 840 860 Series OCT OCT OCT Option Buy/Sell Rate Type (`) CE CE CE 18 10 5

Qty 250 250 250

800 820 840 860

(`3.00) (`3.00) `17.00 `17.00 (`3.00) (`23.00)

Profit: Max. Profit: `4,250/If RELIANCE closes on or between `840-860 on expiry.

880 900

NOTE TE: NOTE : Profit can be booked before expiry if RELIANCE moves in the favorable direction and time value decays.

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Ratings (Returns) :

Buy (> 15%) Reduce (-5% to -15%)

Accumulate (5% to 15%) Sell (< -15%)

Neutral (-5 to 5%)

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