September 4, 2015

Weekly view:
Nifty move above 7800 to lead to short covering

Research analyst
Amit Gupta
Azeem Ahmad
R j Deepak
Raj
D
k Singh
Si h

amit.gup@icicisecurities.com
azeem.ahmad@icicisecurities.com
rajdeepak.singh@icicisecurities.com
jd
k i h@i i i
iti

Weekly
Recommendations
Deal Team
At Your Service

Taking into account the current volatile market conditions, weekly recommendations will be released at an opportune
time during the week.

Last week recommendations follow up

Date
28-Aug-15

Underlyin

View

Strategy

Reco

Target

JUBFOO

Bullish

Buy Future

1677

1790

SL Profit/Los
1620

-14250

* Kindly initiate the recommendation only once the same is communicated on iClick2Gain

Comment
SL Triggered

The Week Gone By

Nifty
oneYour
of the Service
worst weeks of 2015
Dealwitnesses
Team At

Nifty exhibited
Nif
hibi d extreme volatility
l ili and
d closed
l
d the
h weekk near its
i lows
l
at 7655
6 after
f
testing
i
80 0 levels
8050
l
l on Monday.
M d
A
decline of almost 400 points clearly indicates prevailing pressure in the broader market

Banking and Financial services were the major laggards of the week as it declined by more than 6% against 4.3%
decline in Nifty. Technology space has shown significant resilience as it witnessed just 1.5% decline in the week. At
the same time,
time midcap and small cap indices lost 4.1%
4 1% and 3.5%
3 5% respectively

Apart from Thursday, market breadth remained in the negative zone and Tuesday and Friday sessions saw one of
the worst market breadth in the recent days

After witnessing declines towards 20 levels, the volatility index has started moving up once again and closed the
week at an elevated 26.4 levels with the gain of 13%

Only three stocks of Nifty were able to close in green last week. Ambuja Cement, Tech Mahindra and Cairn energy
closed the week with the gains of 1-2.5%

At the same time, major losers of the week were Bhel (-12%), Mahindra & Mahindra (-10%), State Bank of India (), Hindalco Industries ((-9.5%)) and Punjab
j National Bank ((-8.8%))
9.5%),

Nifty highlights
Week on week

Spot

Fut

COC(%)

Tot Fut OI

PCR OI

PCR Vol

ATM IV (%)

Current

7656

7664

2.0

24,422,125

0.99

0.90

24.5

Previous

8002

8023

3.5

22,544,825

0.74

0.85

24.2

Ch
Change
(%)

(4 3)
(4.3)

(4 5)
(4.5)

83
8.3

* Nifty Total futures OI mentioned in the current field is the provisional figure

Outlook for coming week

Nifty move above 7800 to infuse momentum

Due to sharp
D
h
d li
declines
seen during
d i the
h week,
k Call
C ll option
i writers
i
h
have
moved
d into
i
l
lower
strikes
ik and
d 7800
800 Call
C ll saw the
h
highest addition of just over 16 lakh shares. At the same time, highest Put base has shifted lower to 7500 strike.

Rising volatility coupled with continuous buying in index options suggests protection has been bought at deep OTM
Put strikes despite shortened settlement. Hence any intermediate recovery can be expect in Nifty if it is able to move
above 7800 strike which was holding the highest Put base till the last session.
session

In the futures segment, Nifty open interest was increased by more than 8% during the week amid sharp decline in
basis which has come down to just 9 points.

We expect any recovery in Nifty is likely to be led by banking index which has witnessed additions of more than 28%
during last week. The premium in Bank Nifty has also declined sharply to just 16 points indicating short additions.

Nift O
Nifty
Options
ti
bbuild-up
ild
f S
for
September
t b S
Series
i

8100

8000

7900

7800

7700

7600

7500

Put OI

7400

10
9
8
7
6
5
4
3
2
1
0

7300

OI in Millions

Call OI

Bank
Fall
in At
Bank
Nifty key
catalyst for current Nifty decline
DealNifty:
Team
Your
Service

The whole of banking space witnessed selling pressure after opening the week near 17100 levels. The banking Index
continued the decline and by Friday it was down over 6% as it breached 16000 levels only to see closing around
16100.

The adverse fundamental news flows surrounding base rate calculations added to market woes as the private and
public sector stocks fell sharply, as the same is likely to impact the profitability for the banking sector.

The bearish sentiment was clearly visible on the Bank Nifty F&O data. The Future OI saw constant short addition while
in the options space there was constant call writing. The premium in Bank Nifty also came down to an unusually low
level of 10. In Thursdays short covering move as well the call writing continued and premiums shrank resulting a
sharper decline on Friday.

In the price ratio terms the current reading of 2.10 is one the lowest reading since November 2014. This suggests the
Bank Nifty underperformance trend could last for a while. With INR also seeing sharp depreciating trend the banking
space recovery seems to be frail. In options segment, only meaningful support is placed near 15500 level , which is
one of the highest put base.

B k Nifty
Bank
Nift options
ti
bbuild
ild up for
f September
S t b Series
S i
300000

Call OI

Put OI

250000
200000
150000
100000
50000

16500

16400

16300

16200

16100

16000

15900

15800

15700

15600

15500

FIIs
continue
equities.
During week, they sell close to US$0.5 billion
Deal
Teamto sell
AtIndian
Your
Service

Sell off in Indian equities intensified from FIIs in Indian equities (outflows of over US $ 0.5
0 5 billion) as China slowdown
and a likely US rate hike on September 17 are keeping FIIs weary of EM exposure. There was broad based selling
seen across Asian equities. In the absence of any major news flows prior to US FOMC on September 17, the FIIs are
likely to remain in selling mode.

In the futures and options segment, short creation was clearly visible. Both the Nifty and Bank Nifty have seen creation
of short positions (US $ 227 million) as the futures premium continued to contract. In the options segment, aggressive
Put buying was seen from FIIs as they bought index options amounting to US$ 0.5 billion

FIIs sell-off was also visible in other EMs with largest outflows were seen from South Korea (US$ 322 million) followed
by Taiwan (US$ 66 million) and Thailand (US$ 55 million)

DIIs tried to support the market with their buying. During the week, they bought close to US$ 0.6 billion. However
there buying was not able to arrest the Nifty & broader market declines.

In the coming week, the focus would continue to be on the currency segment. If EM currency devaluation continues,
then FIIs could continue to unwind their long EM equity positions.

FIIs cash outflows increased

FII
Date

Index Fut

DII
p
Index Opt

Stock Fut

Cash

Cash

28-Aug

379.23

65.14

449.61

13.34

127.91

31-Aug

81.35

99.46

211.48

-84.33

72.25

1-Sep

-105.35

-28.97

123.41

-98.40

103.40

2-Sep

-270.26

-25.47

72.00

-230.34

132.89

3-Sepp

69.26

48.40

40.52

0.00

126.86

INR likely
to weaken
further towards
67... 65.8 likely to provide support on declines...
Deal
Team
At Your
Service

Despite most EM currencies trading weak, INR displayed relative strength over peers and traded in a narrow range for
most part of the week. Albeit equities remaining under pressure, dollar strengthened and FIIs followed their profit
taking path, INR remained stable except Fridays session. The expectation towards further monetary easing and slowly
fading away US rate hike seemed to have helped INR in showing resilience against DM currencies. Though INR settled
weak in Fridays session, it depreciated most in last few sessions following sharp decline in global equities.

Weakening GBP and Euro triggered slide in GBPINR and EURINR during the weeks trade. Although ECB kept rates
unchanged, their pessimistic stance on outlook and lowering down inflation estimate led to fall in Euro. On the other
hand JPY continued to exhibit unwinding of carry trade positions and fell below 120 mark again. This led to further
upmove of JPYINR beyond 56 levels for the first time in last 10 months.

Although not much activity was observed in futures segment,

segment currency pair witnessed marginal long additions while it
slid towards 66 levels. 65.5-66 Put strikes continued to see addition of OI indicating likely support to the pair on
declines.

As Equity markets look still under pressure and FIIs have maintained their selling stance, also US dollar has gained
strength
g in last few sessions,, we believe US$INR
$
would find buying
y g support
pp
on declines. 65.5-65.8 remains key
y support
pp
for the currency pair.
US$INR Sept Series OI build up
7400

PUT

Open Interest

US$INR

4-Sep
p

1-Sep
p

27-Aug
g

24-Aug
g

19-Aug
g

13-Aug
g

5-Aug
g

10-Aug
g

31-Jul

28-Jul

23-Jul

61
20-Jul

1000
15-Jul

62
7-Jul

68.00

67.50

67.00

66.50

66.00

65.50

65.00

64.50

64.00

63.50

10000

1800
10-Jul

50000

63

2-Jul

90000

64

3400
2600

29-Jun
n

130000

65

4200

24-Jun
n

170000

19-Jun
n

210000

66

5800
5000

16-Jun
n

OI in Thousands

250000

67

6600

8-Jun
n

CALL

290000

11-Jun
n

330000

US$INR future price and OI chart

Deal
Teamlows
Atnear
Your
Service
DAX: Recent
9500
likely to act as important support
S&P Index

S&P500: Upsides recovery may not extend beyond 2000 levels

amid volatility
16
14

Call OI

12
8
6
4
2
2000

1990

1980

1970

1960

1950

1940

Dax Index
250

150
100
50

Put OI

10700

10600

10500

10400

10300

10200

10100

10000

9900

9800

9700

9600

0
9500

OI in Thoousands

200

Call OI

10

1930

1920

1910

1900

Dax: Recent lows near 9500 are likely to act as important

supportt for
f Dax
D
German index closed the week almost flat with just 1.5% losses
amid high volatility. Positive statements from ECB failed to
boost sentiments as it eroded the gains of the week in just one
session. Despite
p
prevailing
p
g weakness,, we believe recent lows
near 9500 levels are likely to act as major support in the near
term. Fresh positive bias should be considered if DAX is able to
sustain above 10500 levels.

Put OI

10
OI Millions

After making lows near 1850 levels, S&P500 witnessed sharp

recovery towards 1950 levels. However, nervousness regarding
FOMC meet continued to induce volatility in the markets and it
is likely to remain below 2000 levels in the near term as well.
The highest Put base for S&P is still placed at 2000 strike. Hence
upsides are likely to be limited till FOMC meet outcome. On
downsides, moving back towards its recent lows of 1850 should
be considered further negative and downsides may be
extended in such scenario.

Stock
options
OIAt
activity.
Deal Team
Your Service
Top liquid stock options
Open Interest Additions
Calls

Puts

Stock

Expiry

Strike

OI in Contract

Chg in OI

Stock

Expiry

Strike

OI in Contract

Chg in OI

SBIN

24-Sep

250

2,653

1632

YESBANK

24-Sep

640

1,233

735

AXISBANK

24-Sep

500

2,013

1451

INDUSINDBK

24-Sep

800

1,242

656

LT

24-Sep

1600

1,653

1115

HINDUNILVR

24-Sep

800

756

648

RELIANCE

24-Sep

900

2,926

832

SBIN

24-Sep

220

1,364

625

HINDALCO

24-Sep

80

1,053

776

DRREDDY

24-Sep

4100

525

468

Open Interest Closures

Calls

Puts

St k
Stock

E i
Expiry

St ik
Strike

OI in
i Contract
C t t

Ch in
Chg
i OI

St k
Stock

E i
Expiry

St ik
Strike

OI in
i Contract
C t t

Ch in
Chg
i OI

SBIN

24-Sep

280

2,679

-835

RELIANCE

24-Sep

840

780

-183

RELIANCE

24-Sep

960

1,186

-282

SBIN

24-Sep

230

782

-173

HDIL

24-Sep

90

283

-119

HDFC

24-Sep

1160

109

-171

YESBANK
HDFCBANK

24-Sep

780

561

-116

COALINDIA

24-Sep

360

86

-116

24 S
24-Sep

1080

377

-60
60

ITC

24 S
24-Sep

310

248

-111
111

11

Stock
Futures Scanner
. Service
Deal Team
At Your
Long build-up

Short build-up

Dabur

2977

286.35

11.79%

1.72%

VOLT IS Equity

5254

254.6

31.55%

-10.37%

Shriram Transpor

10732

858 65
858.65

9 21%
9.21%

4 44%
4.44%

ADSEZ IS Equity

11548

340.4

28.88%

-6.37%
6.37%

Sun TV

20275

389.3

3.59%

15.52%

UNBK IS Equity

5227

157.6

23.19%

-10.45%

UPL Ltd

10298

531.85

0.13%

1.67%

SBIN IS Equity

68495

225.25

15.45%

-10.03%

IRB IS Equity

5300

213.05

13.44%

-10.50%

Long closure

Short covering

IGL

2048

457.05

-9.70%

-5.25%

IOCL

8036

408.6

-15.23%

2.04%

HDFC Bank

95537

995.4

-9.18%

-3.47%

Tata Global

13293

120.35

-8.53%

1.56%

Colpal

4512

1890.3

-8.94%

-3.12%

Ambuja Cem

8022

212.25

-8.12%

2.44%

Ultratech Cem

9742

2916.45

-8.17%

-1.32%

Tech M

18102

530.05

-4.72%

2.17%

HDIL

8012

57.2

-7.73%

-5.14%

Rel Cap

19226

313.45

-0.83%

4.47%

12

Forthcoming
Events
Triggers

Deal Team
Atand
Your
Service

India:
07 Sep : BoP Current Account Balance
09 Sep : Local Car Sales
10 Sep : Trade Balance
11 Sep : Industrial Production

US:
09 Sep : MBA Mortgage Applications
10 Sep : Initial Jobless Claims and Continuing Claims
11 Sep : PPI, Monthly Budget Statement and University of Michigan Sentiment

Euro zone:
08 Sep : GDP

China :
08 Sep : Trade Balance
10 Sep : CPI, PPI

Japan:
08 Sep : GDP, Trade Balance, BoP Current Account Balance
09 Sep : Consumer Confidence
10 S
Sep : Machine
M hi O
Orders
d
and
d PPI

UK :
05 Sep : Halifax House Prices
09 Sep : Industrial Production, NIESR GDP Estimate and Trade Balance
10 Sep : BoE Asset Purchase Target and BoE Bank Rate
11 Sep : Gfk Inflation for next 12 Months

13

Portfolio allocation in Derivatives Products

It is recommended to spread out the trading corpus in a proportionate manner between the various derivatives
research products
Please avoid allocating the entire trading corpus to a single stock or a single product segment
Within each product segment, it is advisable to allocate equal amount to each recommendation.
For example: The Daily Derivatives product carries two intraday recommendations. It is advisable to allocate equal
amountt to
t each
h recommendation
d ti
Stock Trader & Quant Picks recommendations should be considered in cash segment and stoploss on closing basis.
Time frame for these recommendations is 3 month.
Allocation
Products

Return Objective

Product wise Max allocation

allocation
per stock

Frontline Mid-capp
Number of Calls Stocks
stocks

Duration

Daily Derivatives

5%

2-3%

2 Stocks

1%

2-3%

Intraday

Weekly Derivatives

10%

3-5%

2 Stocks

3-5%

5-7%

1 Week

High OI stock

5%

2-3%

2-3 Stocks

5-7%

7-10%

1-2 Weeks

M hl Derivatives
Monthly
D i i

15%

3 5%
3-5%

4 7 Stocks
4-7
S k

7 10%
7-10%

10 15%
10-15%

1 Month
M h

Global Derivatives

5%

2-3%

1-2 index strategy

1 Month

Stock Trader/ Stock in Focus

15%

2-3%

5-6 Stocks

7-10%

10-15%

3 Months

Quant Picks

10%

2-3%

2-3 Stocks

7-10%

10-15%

3 Months

Alpha Trader

5%

22-3%
3%

22-33 Alpha strategy

5%

3 Months

Volatility Insights

5%

2-3%

1-2 Strategy

8-10%

10-15%

1-2 Month

ArbitrageOpportunity

5%

2-3%

2-3 Stocks

> 2.5%

>2.5%

Event Based

Positional / Daily Futures

5%

2-3%

8-12 Stocks

1-3%

2-5%

1-14 days

Index option & Strategy

5%

3-4%

2-5 Nifty

2-3%

1-14 days

Stock option & Strategy

5%

3-4%

2-8 Stocks

3-5%

1-14 days

Currency Futures

5%

3-4%

3-5 Calls

Intraday

14

P k j Pandey
Pankaj
P d

Headd Research
H
R
h
pankaj.pandey@icicisecurities.com
k j
d @i i i
iti
ICICIdirect.com Research Desk,
ICICI Securities Limited,
1st Floor, Akruti Trade Centre,
R d no.7,
Road
7 MIDC
Andheri (East)
Mumbai 400 093
research@icicidirect.com

15

Disclaimer
ANALYST CERTIFICATION
We /I, Amit Gupta B.E, MBA (Finance), Raj Deepak Singh BE, MBA (Finance), Azeem Ahmad MBA (Fin) Research Analysts, authors and the
names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our views about the
subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific
recommendation(s) or view(s) in this report.
Terms & conditions and other disclosures:
ICICI Securities Limited (ICICI Securities) is a Sebi registered Research Analyst having registration no. INH000000990. ICICI Securities Limited
(ICICI Securities) is a full-service, integrated investment banking and is, inter alia, engaged in the business of stock brokering and distribution
off financial
fi
i l products.
d
ICICI Securities
S
i i is
i a wholly-owned
h ll
d subsidiary
b idi
off ICICI Bank
B k which
hi h is
i Indias
I di largest
l
private
i
sector bank
b k and
d has
h its
i
various subsidiaries engaged in businesses of housing finance, asset management, life insurance, general insurance, venture capital fund
management, etc. (associates), the details in respect of which are available on www.icicibank.com.
ICICI Securities is one of the leading merchant bankers/ underwriters of securities and participate in virtually all securities trading markets in
India. We and our associates might have investment banking and other business relationship with a significant percentage of companies
covered by our Investment Research Department. ICICI Securities generally prohibits its analysts, persons reporting to analysts and their
relatives from maintaining a financial interest in the securities or derivatives of any companies that the analysts cover.
The information and opinions in this report have been prepared by ICICI Securities and are subject to change without any notice.
notice The report
and information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way,
transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior
written consent of ICICI Securities. While we would endeavour to update the information herein on a reasonable basis, ICICI Securitiesis
under no obligation to update or keep the information current. Also, there may be regulatory, compliance or other reasons that may prevent
ICICI Securities from doing so. Non-rated securities indicate that rating on a particular security has been suspended temporarily and such
suspension is in compliance with applicable regulations and/or ICICI Securities policies, in circumstances where ICICI Securities might be
acting in an advisory capacity to this company, or in certain other circumstances.
This report is based on information obtained from public sources and sources believed to be reliable,
reliable but no independent verification has
been made nor is its accuracy or completeness guaranteed. This report and information herein is solely for informational purpose and shall
not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial
instruments. Though disseminated to all the customers simultaneously, not all customers may receive this report at the same time. ICICI
Securities will not treat recipients as customers by virtue of their receiving this report. Nothing in this report constitutes investment, legal,
accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific circumstances. The
securities discussed and opinions expressed in this report may not be suitable for all investors, who must make their own investment
decisions, based on their own investment objectives, financial positions and needs of specific recipient. This may not be taken in
substitution for the exercise of independent judgment by any recipient.
recipient The recipient should independently evaluate the investment risks.
risks
The value and return on investment may vary because of changes in interest rates, foreign exchange rates or any other reason. ICICI
Securities accepts no liabilities whatsoever for any loss or damage of any kind arising out of the use of this report. Past performance is not
necessarily a guide to future performance. Investors are advised to see Risk Disclosure Document to understand the risks associated before
investing in the securities markets. Actual results may differ materially from those set forth in projections. Forward-looking statements are
not predictions and may be subject to change without notice.
ICICI Securities or its associates might have managed or co-managed public offering of securities for the subject company or might have
been mandated by the subject company for any other assignment in the past twelve months.
ICICI Securities or its associates might have received any compensation from the companies mentioned in the report during the period
preceding twelve months from the date of this report for services in respect of managing or co-managing public offerings, corporate
finance, investment banking or merchant banking, brokerage services or other advisory service in a merger or specific transaction.

16

ICICI Securities or its associates might have received any compensation for products or services other than investment banking or merchant
banking or brokerage services from the companies mentioned in the report in the past twelve months.
ICICI Securities encourages independence in research report preparation and strives to minimize conflict in preparation of research report.
ICICI Securities or its analysts did not receive any compensation or other benefits from the companies mentioned in the report or third party
in connection with preparation of the research report. Accordingly, neither ICICI Securities nor Research Analysts have any material conflict
of interest at the time of publication of this report.
It is confirmed that Amit Gupta B.E,
B E MBA(Finance),
MBA(Finance) Raj Deepak Singh BE,
BE MBA(Finance),
MBA(Finance) Azeem Ahmad MBA (Fin),
(Fin) Research Analysts of
this report have not received any compensation from the companies mentioned in the report in the preceding twelve months.
Compensation of our Research Analysts is not based on any specific merchant banking, investment banking or brokerage service
transactions.
ICICI Securities or its subsidiaries collectively or Research Analysts do not own 1% or more of the equity securities of the Company
mentioned in the report as of the last day of the month preceding the publication of the research report.
Since associates of ICICI Securities are engaged in various financial service businesses, they might have financial interests or beneficial
ownership in various companies including the subject company/companies mentioned in this report.
It is confirmed that Amit Gupta B.E, MBA(Finance), Raj Deepak Singh BE, MBA(Finance), Azeem Ahmad MBA (Fin), Research Analysts do
not serve as an officer, director or employee of the companies mentioned in the report.
ICICI Securities may have issued other reports that are inconsistent with and reach different conclusion from the inf,ormation presented in
this report.
Neither the Research Analysts nor ICICI Securities have been engaged in market making activity for the companies mentioned in the report.
We submit that no material disciplinary action has been taken on ICICI Securities by any Regulatory Authority impacting Equity Research
Analysis activities.
This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any
locality, state, country or other jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or
which would subject ICICI Securities and affiliates to any registration or licensing requirement within such jurisdiction. The securities
described herein may or may not be eligible for sale in all jurisdictions or to certain category of investors. Persons in whose possession this
document may come are required to inform themselves of and to observe such restriction.

17