Technical Picks | December 14, 2013

"Modi" mania fizzles out; all eyes on RBI, FED

Sensex (20716) / Nifty (6168)
Our markets began the proceedings for the week with a mammoth upside gap after the Bhartiya Janta Party (BJP) made a clean sweep in the state assembly elections. However, the markets had factored in a BJP victory and thus the exuberance didn't last too long. During the week, four out of five trading sessions opened lower and closed in the negative territory. Selling pressure intensified on Friday which dragged the Nifty well below the psychological 6200 mark. All the sectors excluding IT closed in the negative territory. The Capital goods, Banking, and Auto indices underperformed the benchmark indices. The Sensex and the Nifty shed 1.46% and 1.34%, respectively, over the previous week's closing.
Source: Falcon

Exhibit 1: Nifty weekly chart

Exhibit 2: Nifty Daily chart

Pattern formation:

The '89-day EMA' and the '89-week EMA' are placed at 20273 / 6030 and 19132 / 5743 levels, respectively. The '20-day EMA' and the '20-week EMA' are placed at 20834 / 6198 and 20240 / 6022 levels, respectively. The daily and weekly momentum oscillators are still negatively poised. The weekly charts of both the benchmark indices now depict a 'Bearish Engulfing' Japanese candlestick pattern.

Source: Falcon

Future outlook
It was an eventful week for our market as the bulls conquered the previous life time high of 6357 on the Nifty at the opening tick on Monday. The index went on to register a new all time high (6415 6415) after a long wait of five years. However, the bulls 6415 then turned skeptical; the bears pounced on this opportunity to dictate the trend in almost all the trading sessions. During the concluding session of the week, the Nifty sneaked marginally below the daily '20 EMA', which is a sign of weakness. However, the important support level of 6150 is still untouched. Looking at the negative placement of momentum oscillators and the 'Bearish Engulfing' Japanese candlestick pattern on the weekly

chart, it is clear that any sustainable move below 6150 may lead to a decline towards the immediate 'Upward Sloping Trend Line' (please refer exhibit 2) support level of 6080 6080; even the daily '89 EMA' level of 6029 could get tested. On the flip side, the index is now trading around the 50% Fibonacci retracement level of the recent up move from 5972 to 6415 6415. A sustainable move beyond the gap area of 6209 - 6235 may bring the bulls back into action. In this scenario, we may witness a rally towards 6300 - 6350 levels. The coming week is expected to trade with enhanced volatility on the back of events such as the RBI monetary policy and the FOMC meet. Hence, the traders are advised to be light on positions and maintain strict stop losses.

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Technical Picks | December 14, 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 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 21,755 6,502 12,524 1,218 202 526 1,390 2,056 739 355 185 388 332 403 309 172 2,498 363 2,888 1,229 857 730 2,263 130 578 1,250 123 494 3,430 327 303 61 801 1,193 901 1,000 1,816 150 163 318 656 104 461 901 464 1,986 204 607 421 96 442 2,123 2,026 R1 21,235 6,335 11,945 1,155 190 510 1,315 1,981 699 338 170 365 327 390 296 161 2,449 351 2,777 1,205 832 710 2,162 124 569 1,168 113 455 3,402 321 281 56 780 1,122 885 975 1,753 144 150 299 610 101 442 883 442 1,865 198 589 396 92 428 2,062 1,914 PIV OT PIVO 20,964 6,248 11,648 1,121 184 500 1,267 1,938 678 327 162 352 324 383 286 156 2,420 343 2,716 1,164 818 697 2,109 121 562 1,124 108 434 3,362 316 268 53 767 1,083 868 953 1,718 140 142 289 587 99 431 870 430 1,803 191 579 377 88 419 2,029 1,849 S1 20,444 6,081 11,069 1,058 173 484 1,192 1,862 639 310 147 329 320 369 273 145 2,371 331 2,605 1,140 792 678 2,008 115 553 1,041 98 395 3,333 310 247 49 746 1,011 853 929 1,655 134 130 270 542 96 413 852 408 1,681 185 561 352 83 406 1,968 1,736 S2 20,173 5,995 10,771 1,024 166 474 1,145 1,819 617 298 139 316 317 362 263 140 2,342 323 2,545 1,099 778 665 1,954 112 546 997 93 374 3,293 305 234 46 733 972 836 906 1,620 130 122 259 518 94 401 839 395 1,619 178 550 334 79 396 1,935 1,671

Technical Research Team

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Derivatives Review | December 14, 2013

Big correction unlikely, don't short

Nifty spot closed at 6168.40 this week, against a close of 6259.90 last week. The Put-Call Ratio has increased from 0.92 to 0.95 levels and the annualized Cost of Carry is positive 13.36% 13.36%. The Open Interest of Nifty Futures increased by 14.56% 14.56%.

Put-Call Ratio Analysis

PCR-OI has increased from 0.92 to 0.95 levels. In call options good amount of buildup was seen in 6200 & 6300 strikes, followed by significant unwinding in the range of 6400-6800 strikes. While in put options we hardly saw some buildup, maximum buildup was seen in 6400 strike last week. Highest buildup is seen in 6300 call & 6000 put options.

Implied Volatility Analysis

Implied Volatility (IV) for NIFTY has decreased from 22.98%.to 15.85%. Historical volatility (HV) is at 20.83% and that for BANKNIFTY is trading at 38.73%. Liquid counters having very high HV are ORIENTBANK, BANKINDIA, HDIL, JPASSOCIAT and IRB. Stocks where HV are on lower side are OFSS, INFY, COLPAL, LUPIN and RELIANCE.

Open Interest Analysis

Total open interest of market has increased from `1,42,698/- cr. to `1,48,480/- cr. Stock futures open interest has increased from `35,898/- cr. to `37,662/- cr. Some of the large cap which added open interest are NTPC, SIEMENS, COALINDIA, POWERGRID and TATAMOTORS. Open interest was shed in large cap names like SSLT, CAIRN, RELINFRA, HEROMOTOCO and WIPRO.

Cost-of-Carry Analysis
Nifty futures closed at a premium of 29.35 points against the premium of 43.85 points to its spot. Next month future is trading with premium of 83.90 points. Liquid counters where CoC is high are VOLTAS, JPPOWER, HINDZINC, TCS and UPL. Stocks with negative CoC are POWERGRID, HDIL, HCLTECH and BHEL.

Derivative Strategy
Scrip : NIFTY View: Mildly Bullish Buy/Sell BUY
BEP - 6325

CMP : 6168.40

Lot Size : 50

Exercise Date (F & O) : 26th Dec. 2013 Expected Payoff

Strategy: Long Call Scrip NIFTY Strike Price 6300 Series DEC Option Type CE Buy/Sell Rate (`) 25.00

Qty 50

Closing P rice Price (`)

Expected oss rofit/Loss Profit/L

6050 6150 6250

(`25.00) (`25.00) (`25.00) `25.00 `125.00 `225.00

Max. Risk: `1250/If NIFTY closes on or below 6300 on expiry.

rofit: Unlimited Max. P Profit: If NIFTY continues to move above BEP .

6350 6450

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

6550

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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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