Technical Picks | February 9, 2013

Bears increase foothold on the back of lower GDP growth projections

Sensex (19485) / Nifty (5904)
Trading for the week started off on a quiet note considering mixed trading sentiments across the globe. On Tuesday, our benchmark indices, the Sensex and the Nifty, opened with a downside gap considering the massive overnight correction on the US as well as European bourses. In our previous weekly report, we had mentioned a few negative technical evidences such as, confirmation of 'Hanging Man' Japanese Candlestick pattern, the negative crossover in weekly 'RSI' momentum oscillator and the daily ADX (9) indicator. The impact of these tools was seen during the whole week as indices continued their negative momentum throughout the week. On Friday, indices fell sharply during the last half an hour of the session. As a result, the Nifty sneaked slightly below the psychological level of 5900 but eventually managed to close 5900; above it. During the week, the Consumer Durable, Metal, PSU and Oil & Gas counters experienced massive selling pressure; whereas only the IT sector has outperformed the benchmark indices by closing well inside the positive territory. The Sensex and the Nifty shed 1.50% and 1.59%, respectively during the week.
Source: Falcon Source: Falcon

Exhibit 1: Nifty weekly chart

Exhibit 2: Nifty Daily chart

Pattern Formation
The '20-day EMA' and the '20-week EMA' are placed at 19768 / 5990 and 19160 / 5813 levels, respectively. The Nifty has broken down from the 'Upward Sloping Channel' (as shown in the chart). The weekly 'RSI Smoothened' is now signaling a negative crossover.. The 'Hanging Man' Japanese Candlestick pattern on the weekly chart is intact.

The sharp fall during the last half an hour on Friday has now confirmed a breakdown of the 'Upward Sloping Channel' on the daily chart. (Please refer exhibit 2). Please note that the Sensex has not yet confirmed a breakdown of the 'Upward Sloping Channel' pattern. Also Indices have now precisely tested 78.6% Fibonacci retracement level of the rise from 19149 / 5823 (low on December 18, 2012) to 20204 / 6112 (high on January 29, 2013). Considering the Channel pattern breakdown and negative placement of weekly momentum oscillators, we can infer that indices may experience a severe correction in the coming week if they manage to sustain below this week's low of 19414 / 5883 In this scenario, we may 5883. witness a corrective move towards 19000 - 18870 / 5800 5735 levels. On the flipside, 19648 - 19768 / 5953 - 5991 levels would act as strong resistance for our benchmark indices.

Future Outlook
In-line with our expectations, markets experienced strong negative momentum throughout the week. During the week, indices precisely met with the mentioned targets of 5897. 19596 - 19406 / 5940 - 5897 The news flow continued to be negative during the week as the Government lowered the GDP growth projections to the lowest level in a decade.

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Technical Picks | February 9, 2013

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 20,089 6,097 12,894 1,376 214 4,736 1,540 2,148 915 343 236 439 333 431 367 283 2,002 352 3,138 703 845 665 1,878 118 477 1,231 179 2,855 316 434 89 710 1,579 628 920 1,663 162 345 923 115 453 918 542 2,484 192 657 785 302 107 412 1,493 2,024 424 R1 19,787 6,000 12,587 1,340 202 4,630 1,495 2,097 842 332 223 420 324 406 353 276 1,928 344 3,075 687 827 657 1,798 114 465 1,180 170 2,822 309 424 81 694 1,545 613 902 1,625 155 330 893 113 441 891 515 2,385 181 637 766 294 102 400 1,458 1,954 418 PIVO PIVOT 19,601 5,942 12,416 1,313 195 4,571 1,470 2,068 802 324 214 410 319 392 343 271 1,888 339 3,006 676 804 646 1,753 111 457 1,153 163 2,784 304 417 77 681 1,516 600 889 1,601 151 320 876 111 434 874 500 2,331 175 625 740 289 99 392 1,402 1,910 410 S1 19,299 5,845 12,110 1,277 183 4,465 1,426 2,017 729 314 200 391 310 367 329 264 1,815 330 2,943 660 785 639 1,674 107 445 1,102 154 2,751 297 407 69 666 1,482 585 871 1,564 144 304 846 109 422 847 472 2,232 164 604 721 281 94 380 1,366 1,841 404 S2 19,113 5,787 11,939 1,250 176 4,406 1,401 1,988 690 306 191 381 304 353 319 259 1,774 325 2,874 649 762 627 1,629 105 437 1,075 147 2,712 292 400 65 653 1,452 573 858 1,539 139 295 829 107 415 830 457 2,177 158 593 695 276 91 373 1,310 1,797 395

Technical Research Team

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Derivatives Review | February 9, 2013

FII's continue to pump liquidity

Nifty spot closed at 5903.50 this week, against a close of 5998.90 last week. The Put-Call Ratio has increased from 0.94 to 0.98 levels and the annualized Cost of Carry is positive 5.67% The Open Interest of Nifty Futures increased by 6.40% 5.67%. 6.40%.

Put-Call Ratio Analysis

PCR OI has increased from 0.94 to 0.98 levels. In the week gone by good amount of buildup was seen in 5600-5900 put option followed by some unwinding in 6000-6100 strike price which was much of the short covering, while in call option 5900-6200 strikes has seen considerable amount of buildup in open interest and 6400 call option has seen decent amount of unwinding. Highest buildup in call option is in 6100 strike price and in put option 5900 strike has the maximum open positions as of now, this levels will act as the major resistance and support for our market going forward.

Implied Volatility Analysis

Implied Volatility (IV) for NIFTY has increased from 12.65% to 13.76%. Historical volatility (HV) is at 10.79% and that for BANKNIFTY is trading at 13.96%. Liquid counters having very high HV are HDIL, IVRCLINFRA, SUZLON, JUBLFOOD and OPTOCIRCUI. Stocks where HV are on lower side are POWERGRID, LUPIN, HDFCBANK, SIEMENS and GRASIM.

Open Interest Analysis

Total open interest of market has increased from Rs.1,08,466/- cr. to Rs.1,32,675/- cr. Stock futures open interest has increased from Rs.33,655/- cr. to Rs.33,861/- cr. Some of the large cap names which added open interest are NTPC, BANKBARODA , BHEL , DLF and JPASSOCIAT. Open interest was shed in large cap names like SESAGOA, LUPIN, ACC, BHARTIARTL and COALINDIA.

Cost-of-Carry Analysis
Nifty futures closed at a premium of 18.30 points against the premium of 36.65 points to its spot. Next month future is trading with premium of 45.25 points. Liquid counters where CoC is high are WELCORP NHPC, SUZLON, GVKPIL and PNB. , Stocks with negative CoC are SAIL, AMBUJACEM, BHEL, GAIL and POWERGRID.

Derivative Strategy
Scrip :BHEL View: Mildly Bullish Buy/Sell BUY SELL
BEP - `213 Max. Risk: `3,000/If BHEL closes on or below `210 on expiry.

CMP : `207.05

Lot Size : 1000

Exercise Date (F & O) : 28th. Feb. 2013 Expected Payoff

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

Strategy: Bull Call Spread Scrip BHEL BHEL Strike Price 210 220 Series FEB FEB Option Type CE CE Buy/Sell Rate (`) 5.00 2.00

Qty 1000 1000

200 205 210

(`3.00) (`3.00) (`3.00) `2.00 `7.00 `7.00

Profit: Max. Profit: `7,000/If BHEL closes on or above `220 on expiry.

215 220

NOTE TE: NOTE : Profit can be booked before expiry if BHEL moves in favorable direction.

225

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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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