Sunday, November 11, 2012
The week began with attention solely focused on who would the Mr. President of the United States of America. Obama’s second coming brought the US indices lower and all other global markets appeared to have followed suit. Investors appeared to be worried about how Obama will deal with or avoid the ‘fiscal cliff.’ Interest rates were left unchanged by ECB and Mario Draghi sounded that economic activity in the eurozone would remain weak in the near term. Indian indices were resilient at the start of the week but turned in the red from mid-week as the global sentiment worsened. For the week the Sensex and Nifty index ended marginally lower by 0.18%. The IIP numbers will have its impact on few segments as the numbers are announced on Monday. The earnings season continues and investors will continue to pay closer attention to corporate numbers as they come. The Monthly WPI is expected on Wednesday. It may be recalled that the diesel price hike had led to WPI inflation hitting a 10-month high in September.
Obama wins US Presidential election for the second term as 44th President after winning a key victory in Ohio. The Second coming of President Barack Obama has brought more worries than joy. To begin with the fiscal cliff is top of the mind worry for the world and not just the United States of America. In his victory speech, Obama stressed that the Best Is Yet to Come add that the country lives up to its legacy as the global leader in technology and discovery and innovation, with all the good jobs and new businesses that follow.
Key benchmark indices edged lower as world stocks fell on concerns about the US "fiscal cliff" and the euro-zone economy. The barometer index, BSE Sensex, was down 162.58 points or 0.86%, off 210.74 points from the day's high and up 27.27 points from the day's low. The market breadth was weak. Index heavyweight Reliance Industries (RIL) extended fall in late trade. Index heavyweight and cigarette major ITC edged higher in choppy trade. United Spirits (USL) inched up ahead of the announcement of the deal with Diageo plc whereby Diageo will initially acquire 27.4% in USL and it will eventually acquire a majority stake in the Indian spirits maker. Indian stocks dropped for the second day in a row today, 9 November 2012. The Sensex has declined 218.73 points or 1.15% in the past two trading sessions. The Sensex has surged 3,228.76 points or 20.89% in calendar 2012 so far (till 9 November 2012). The Sensex has gained 178.30 points or 0.96% in this month so far. From a 52-week high of 19,137.29 on 5 October 2012, the Sensex has declined 453.61 points or 2.37%. From a 52-week low of 15,135.86 on 20 December 2011, the Sensex has risen 3,547.82 points or 23.43%.
The global market events will start becoming relevant for the Indian markets as the domestic earnings season winds up
Although the Indian market closed lower than the end of the previous week, the noting factor was the resilience of it as compared to the other major bourses. Markets globally did not react positively to the reelection of Mr. Barack Obama, rather the US indices slipped sharply and continued its downward trajectory till the week end. The European and most of the Asian bourses reacted the same way as fear of fiscal cliff in the US and the consequent impact on the global markets weighed heavily among the market participants. Relative outperformance of the Indian markets was perhaps due to the perception that the move to correct fiscal cliff would benefit the Indian market in the medium term. In general the Indian markets have really ignored the global events during the past several weeks. On Friday though the market witnessed sharp correction following lower than expected earnings reporting by SBI. Poor result by Tata Steel and ONGC also impacted the market. Overall for the week ended 9th November 2012 the benchmark nifty fell 11.45 points to close at 5686.25. On Friday though some bit of shorts were added in the nifty and stock futures. So perhaps there could be some consolidation in the next week. The nifty future of the November series traded at sharp premium throughout the week and closed at 5720.60 on Friday (34.35 points premium to the underlying). The global cues during the previous week were negative. Following the US election some of the macro data points from Germany disappointed. Perhaps now the global market action would start becoming relevant, now that the domestic earnings season is over. The nifty future of the November series added 3.57 lakh shares in open interest (OI) on the long side during the week under review to take its total OI to 1.89 crore shares. On Friday the OI addition was on the short side. Following disappointing earnings by SBI, the Bank Nifty future of the November series shed 0.55 lakh shares in OI to take its total OI to 12.46 lakh shares. The nifty option segment action on Friday indicates some bit of consolidation in the Diwali week, within the range of 5600-5700. The 5600 and above strike call witnessed aggressive writing, while the 5700 and up strike put shed OI wrote earlier. The average volume during the week under review though was higher at Rs 110048.16 crore as compared to Rs 96645.66 crore during the previous week. Futures and option volume breakup The put-call ratio of index options on Friday was higher at 1.05 as compared to 0.83 the previous day. The stock put-call ratio was higher at 0.66 as compared to 0.6 the previous day. The market wide put-call ratio on Friday was higher at 0.98 as compared to 0.8 the previous trading day. Open Interest (OI) break-up as on 9th November 2012 The option action on Friday indicated some bit of consolidation as call options above the 5600 strike added OI due to writing while the 5700 and above strike put options shed OI as puts wrote earlier were covered. The 5700 and 5800 strike call option added 5.43 lakh shares and 13.92 lakh shares in OI to take their total OI to 45.69 lakh shares and 77.27 lakh shares respectively. The 5600 strike call also added 1.33 lakh shares in OI due to writing. On the other hand the 5700 and 5800 strike put option shed 12.70 lakh shares and 9.41 lakh shares in OI to take their total OI to 58.16 lakh shares and 27.66 lakh shares respectively. (See the most active nifty option table) Open Interest (OI) of major November 2012 series stock futures as on 9th November 2012