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Technical Picks | August 31, 2013

Opportunity in Adversity
Sensex (18620) / Nifty (5472)
The opening session of the week started off marginally higher considering mixed global cues. During this session, we witnessed range bound and lackluster price activity. The next 2 days were completely dominated by the bears as the Nifty plunged by more than six percent on the back of aggravating concerns over Indian Rupee (INR) depreciation and passage of the food security bill. In the process, INR hit a new all time low below 68 and created a panic selling in equity markets. However, post midsession on Wednesday, we witnessed a strong bounce from the lows. During the same session, Nifty recovered from the lows to close with a very minor loss. Despite the August series derivative expiry, we witnessed a continuation of the upward momentum which eventually lasted till the fag end on Friday's session too. The IT and Healthcare counters soared during the session; whereas the Banking, Realty and Capital Goods sectors ended in the negative territory despite a sharp bounce back from the lows. The Sensex ended the week with a nominal gain of 0.54%; but the Nifty precisely managed to close at the previous week's closing point.
Source: Falcon

Exhibit 1: Nifty weekly chart

Exhibit 2: Nifty Hourly chart

Pattern formation:

Source: Falcon

The '89-day EMA' and the '89-week EMA' are placed at 19164 / 5738 and 18609 / 5613 levels, respectively. The '20-day EMA' and the '20-week EMA' are placed at 18647 / 5514 and 19183 / 5743 levels, respectively. The monthly 'RSI-Smoothened' oscillator is still negatively poised; whereas the weekly 'Stochastic' momentum oscillator has given a positive crossover.

overshadowed by the bulls as the recovery from the low of 5118 left everyone flabbergasted. The weekly chart now depicts one more 'Bullish Hammer' Japanese candlestick pattern. The pattern implication remains same and the pattern needs confirmation in the form of a closing above the high of 5529 5529. In this scenario, we can expect an extended bounce towards 5640 - 5720 levels. The price pattern in hourly chart also supports the above mentioned hypothesis. The Nifty has oscillated within a 'Downward Sloping Channel' (please refer exhibit 2) in hourly chart and during Friday's session, a channel pattern breakout has been confirmed. The weekly 'Stochastic' momentum oscillator is also signaling positive crossover. On the lower side, the immediate support levels are seen around 5360 - 5300 levels. Although the current price action indicates a near term bounce in our market, we would like to highlight that the intermediate trend remains bearish as the weekly 'Lower Top Lower Bottom' formation and the Negative crossover in monthly 'RSI-Smoothened' oscillator are still intact. Therefore any up move in the near term can only be construed as a pullback. We would advise traders to adopt stock specific approach and follow strict stop losses.

The weekly chart depicts yet another 'Bullish Hammer' Japanese candlestick pattern. The 'Lower Top - Lower Bottom' formation in weekly chart is still intact.

Future Outlook
It was a complete roller-coaster ride for the market participants as we witnessed a 'V' shape recovery from the lows. In our previous report, we had mentioned that if the Nifty stays above 5504, then we might expect some bounce back in our market. However, the Nifty could not close above 5504 and corrected sharply towards our mentioned target of 5100 by Wednesday afternoon. The second half of the week completely
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Technical Picks | August 31, 2013

Weekly Pivot Levels For Nifty 50 Stocks

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 INDUSINDBK INFY ITC JINDALSTEL JPASSOCIAT KOTAKBANK LT LUPIN M&M MARUTI NMDC NTPC ONGC PNB POWERGRID RANBAXY RELIANCE RELINFRA SBIN SESAGOA SUNPHARMA TATAMOTORS TATAPOWER TATASTEEL TCS ULTRACEMCO R2 19,545 5,783 10,221 1,071 192 471 1,081 1,959 506 336 139 336 344 443 297 150 2,507 327 2,536 1,114 818 676 2,207 116 676 908 117 418 3,203 330 259 39 720 803 878 863 1,362 129 140 300 517 109 459 922 392 1,651 226 578 321 86 301 2,202 1,698 R1 19,082 5,627 9,635 1,018 182 446 957 1,898 483 317 129 305 332 430 274 140 2,400 311 2,398 1,077 768 635 2,127 111 654 856 99 387 3,154 319 241 36 690 764 837 823 1,303 124 135 275 474 103 434 888 367 1,585 207 549 310 81 287 2,117 1,586 PIV OT PIVO 18,266 5,373 9,001 964 164 410 870 1,789 457 298 117 280 320 407 256 131 2,260 292 2,262 1,008 700 582 1,995 104 617 806 87 353 3,081 302 229 33 639 720 790 782 1,259 117 129 254 447 98 401 826 340 1,519 181 513 298 77 276 1,966 1,499 S1 17,803 5,218 8,415 911 154 385 747 1,728 434 280 107 249 308 394 233 121 2,153 276 2,124 971 651 540 1,914 98 594 754 69 322 3,033 292 210 30 609 681 749 742 1,200 112 125 229 404 92 375 792 315 1,453 162 484 287 72 263 1,881 1,388 S2 16,986 4,963 7,781 858 136 349 660 1,619 408 261 95 225 296 370 215 112 2,013 256 1,987 902 583 487 1,782 91 557 705 58 288 2,960 275 199 27 558 638 701 700 1,156 105 118 209 377 87 343 730 287 1,387 136 448 275 67 252 1,730 1,300

Technical Research Team

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Derivatives Review | August 31, 2013

Though rollovers are less, FII's still short on market.

Nifty spot closed at 5471.80 this week, against a close of 5471.75 last week. The Put-Call Ratio has increased from 0.96 to 1.22 levels and the annualized Cost of Carry is negative 3.72% 3.72%. The Open Interest of Nifty Futures decreased by 35.06% 35.06%.

Put-Call Ratio Analysis

PCR-OI has increased from 0.96 to 1.22 levels. As it is beginning of the expiry we are seeing quite scattered built-up in options segment, wherein maximum amount of buildup is seen in 5300 put & 5500 call strikes. Fii's have been shorting index future in last series and have even rolled their positions. In Friday's trading session we have seen highest buildup in 5300 put and interestingly Fii's were net buyer in index options of more than Rs.1000/- cr, indicating they have bought 5300 put.

Implied Volatility Analysis

Implied Volatility (IV) for NIFTY has increased from 24.29%. Historical volatility (HV) is at 31.03% and that for BANKNIFTY is trading at 44.91%. Liquid counters having very high HV are FINANTECH, JPPOWER, RANBAXY, HDIL and SESAGOA. Stocks where HV are on lower side are OFSS, INFY, MARUTI, JUBLFOOD and GRASIM.

Open Interest Analysis

Total open interest of market has decreased from Rs 1,70,854/- cr. to Rs. 1,10,983/- cr. Stock futures open interest has decreased from Rs. 32,179/- cr. to Rs. 26,466/- cr. Some of the large cap which added open interest are IDFC, SESAGOA, AXISBANK, PNB and SIEMENS. Open interest was shed in large cap names like POWERGRID, RELIANCE, TATAMOTORS, BHEL and GRASIM.

Cost-of-Carry Analysis
Nifty futures closed at a discount of 15.05 points against the premium of 18.55 points to its spot. Next month future is trading with premium of 12.90 points. Liquid counters where CoC is high are UNITECH, PUNJLLOYD, CHAMBLFERT, FEDERALBNK and IDFC. Stocks with negative CoC are FINANTECH, HDIL, SESAGOA, HEROMOTOCO and AMBUJACEM.

Derivative Strategy
Scrip : NIFTY View: Mildly Bearish Buy/Sell BUY SELL Qty 50 100 Scrip NIFTY NIFTY Strike Price 5400 5200 CMP : 5456.75 Lot Size : 50 Exercise Date (F & O) : 26th. Sept 2013 Expected Payoff
Closing P rice Price (`) Expected Profit/L oss rofit/Loss

Strategy: Ratio Put Spread Series SEPT SEPT Option Type PE PE Buy/Sell Rate (`) 130 75

4900 5025 5150 5275

(`80.00) `45.00 `170.00 `145.00 `20.00 `20.00

BEP - 4980 Max. Risk: Unlimited

If NIFTY continues to move below BEP

Max. P rofit: `11000/Profit:

If NIFTY closes at 5200 strike on expiry.

5400 5525

NO TE : Profit can be booked before expiry if NIFTY moves in favorable direction and time value decays. NOTE TE:

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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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