K.S. Badri Narayanan

Despite a sharp recovery on Friday, the Nifty November future closed a good 3.6 per cent lower over its previous week’s close of 2829 points.

However, the day’s rally, buoyed by short covering, did help it end at a 30-point premium over its spot, which closed at 2693.45. In terms of rollover, the performance so far has only been moderate. The week saw about 15 per cent rollover in open interest, which is marginally better than that of the last month.

1) We had presented two strategies - going short on Nifty future if it dips below 2700 and short straddle by selling Nifty 2800 call and puts.

Both the strategies would have yielded decent profits. But as recommended, traders can hold the short straddle strategy for one or two days more (ahead of expiry).

State Bank of India: We had advised traders to go short on SBI future keeping the stop-loss at 1265.

Traders would have made windfall profits as the stock price tumbled quite sharply.

Notwithstanding the strong close on Friday, we expect the Nifty future to remain under pressure.

It now faces resistance at 2850-2900. A breach of this level can take the Nifty future to 3250 level. On the other hand, if it fails to sustain at current levels, it can re-test its October lows.

Any fall below 2550 has the potential to take Nifty future to as low as 1880-1950.

India VIX or Volatility Index, which indicates the expected immediate volatility of the market, has consistently been hovering around 60-95 point range throughout last week.

This figure is quite high and indicates that Nifty is set to witness heightened volatility both during the week and in intra-day trades. But for the week it closed marginally lower at 66.46.

For the forthcoming week, we expect Nifty to open on a positive note. However, considering that it is also the settlement week for November derivative contracts, traders may have to brace themselves for sharp volatility in the markets.

Traders may have to exercise more caution as markets are likely to remain quite choppy and volatile in the coming weeks.

Traders with a penchant for risk however can consider going long on Nifty future keeping the stop-loss at 2495. As long as 2550 is not broken, the Nifty future has the potential to go up.

The stop-loss has been given at quite distance intentionally.

However, if the Nifty future opens with a huge gap of over 100 points, traders are advised to stay away from the market as 2850-2950 appears a vulnerable range which may cause sharp swings.

ONGC (687.65): The stock witnessed a sharp recovery from Friday’s low level.

The future closed in a premium at 691 and saw a sharp build up in both November and December futures. Interestingly, a chunk of the build up in positions was on the long side. The stock may see a sharp recovery from hereon. It may find support at 640 levels and may face a resistance at 785. We feel the current rally has the potential to take the stock up to its resistance level.

Traders can consider going long on ONGC with a stop-loss at 640.

The cumulative FII positions as percentage of total gross market position on the derivative segment as on November20 decreased to 36.54 per cent. Foreign institutional investors have been net sellers during most part of the week. They now hold index futures worth Rs 7,939.65 crore and stock future worth Rs10,688 crore. Their index options holding stood higher at Rs 13,523.79 crore.

© Copyright 2000 - 2009 The Hindu Business Line