MUMBAI: High amount of volatility on the Indian bourses is likely Thursday ahead of index heavyweight Reliance Industries Q3 results. The cues are exceptionally contradicting – on the one hand, we have positive global markets and on the other, huge build up of short positions in index and frontline heavyweights.

Given the Singapore Nifty futures trading 43 points higher from previous close, NSE’s Nifty may open on positive note Thursday. However, FIIs selling in cash and index futures are likely to check the gains at higher levels. 2700 level is the key for Nifty.

According to analyst estimates, Reliance Industries is expected to show a dismal performance for the third quarter of FY09 with a 20 per cent drop in profitability. But any positive surprises from Reliance can improve the market sentiment significantly.

“I expect a topsy-turvy trade for the day. Unless Nifty breaches 2700 decisively I will advise players not to go aggressively short on Nifty, instead buy put options. Traders, who have gone short at lower levels Wednesday, are likely to cover in initial period. Small players with low risk appetite should stay away till the clear direction is known. For traders fresh straddle at 2700 will be a good strategy,” said Ankit Sinha, CEO-Spark Advisory.

On Wednesday, Nifty tumbled 3.23 per cent to end at 2706.15 while Nifty January futures ended at a discount of 20 points to spot.

Huge unwinding of long calls was seen at 2800 strike and significant call writing was observed at 2700, 2900 and 3000 strikes. On the other hand, enormous unwinding of short puts were seen at 2700 strike while modest put writing was observed at 2600 and 2500 levels.

Reliance Industries attracted significant short positions Wednesday as traders expect a drop of 20 per cent in the company’s profitability. Reliance January contract fell 5.57 per cent while open interest added 4.79 lakh shares. The contract ended at a discount of Rs 2 to the spot closing.

Wednesday, foreign players sold Rs 700 crore in index futures while they bought Rs 50 crore in stock futures. India VIX closed at 45.41 per cent from 45 per cent earlier.

source: economic times

Tags: calls, daytrading, free calls, intraday, tips

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