In general, IV is a bit too high for comfort. In the futures market, we have a problem in that individual stocks have been moving in a jerky fashion without clear runs of several successive up or down sessions.
Technically speaking, specific stocks such as Bank of Baroda, BPCL, Bhel, Cipla, IPCL, Mahindra & Mahindra , Reliance Industries, Satyam Computers and VSNL appear to be in steady uptrend.
Of these, RIL and IPCL are looking a little over-extended - the bull run has lasted too long. Bhel has shot up too fast and the counter has been driven by political considerations, which may change over the weekend.
| Stocks with highest changes in options OI | ||
| Cos | % change | PCR |
| MRPL | 203.74 | 0.05 |
| TVS Motors | 105.88 | 0.17 |
| VSNL | 81.68 | 0.1 |
| Reliance Energy | 72.59 | 0.06 |
| Allahabad Bank | 67.67 | 0.16 |
| NDTV | 67.48 | 0.08 |
| Titan Industries | 65.77 | 0.25 |
| HCL Technologies | 56.9 | 0.9 |
| Neyveli Lignite | 54.13 | 0.04 |
| Escorts | 50 | 0.1 |
Long July futures in the others such as Bob, BPCL, Cipla, M&M, SCS and VSNL are reasonable perhaps. But perhaps one should wait for settlement and go long in August instead in this basket of stocks. There is a speculative possibility in IFCI where the price has suddenly risen with a coincident rise in the futures volumes and OI.
In ITC and Bajaj, the July futures are trading at perceptible premiums to cash - we could interpret this two ways. Either the cash price will spurt or the futures price will crash in the next four sessions. My instinct would incline towards the latter, which means a short futures position may be profitable.
| Stocks with highest change in prem/(disc)* | ||
| last week | previous week | |
| Hero Honda | -1.9 | -25.05 |
| ITC | 12.85 | -41.5 |
| Syndicate Bank | -2.8 | -4 |
| Sun Pharma | 3.35 | -8.5 |
| Jindal Steel | 7.8 | -11 |
| Tata Tea | -5.9 | -15.45 |
| HDFC | 1.55 | -7.4 |
| Bajaj Auto | 7.35 | -6.35 |
| Bank of Baroda | 2.35 | 0.15 |
| Divis Labs | 12.7 | 3.51 |
| * - prem/(disc) sorted as a % of cash prices | ||
In the options segment, the only low risk pick appears to be Satyam. With cash at 532, a long 540c (4.75) versus short 560c (1.9) costs 2.85 and could pay a maximum of 17 plus.
