Futures & Options -

May 2011

EXPIRY PREVIEW (April 29, 11 May 20, 11)

Nifty: 5486.35; Nifty May Future: 5484.6

KEY INDICATIONS:
We recommend remaining partial hedged below 5620 of Nifty. FIIs accumulated huge short positions in stock futures and in index futures at the beginning of the month and then some long positions. May series witnessed mixed trend over the month as Nifty was southward in first five sessions and more or less at same level thereafter. June series futures premium is higher than current series and cost-of-carry has moved up to 7% showing dominance by long rollover. Market wide rollover completed 21%, which is higher than the average of last three months rollover. Frontline counters witness 26% rollover dominated by long positions.

OUTLOOK:
The futures side has been loaded with short positions by FIIs over the month, which would continue to provide support to the market in the form of short covering in the expiry week. Monsoon and FIIs inflow would decide the market direction going forward. If market would breach the present trading range then we may witness sharp swing in the market. Therefore we suggest remaining cautious in the coming sessions.

Markets future Positions Over Month:

100,000 80,000 60,000 40,000 C hange in O I 20,000 0 -20,000 -40,000 -60,000 -80,000 -100,000 29-Apr-11 10-M ay -11 11-M ay -11 12-M ay -11 13-M ay -11 16-M ay -11 17-M ay -11 18-M ay -11 19-M ay -11 20-M ay -11 2-M ay -11 3-M ay -11 4-M ay -11 5-M ay -11 6-M ay -11 9-M ay -11

5800 5700 5600 N ifty 5500 5400 5300 5200 5100

Fresh Long

Fresh Short

Long Squaring

Short Covering

Nifty

B N Rahul, 022-30272837, bn.rahul@dalmiasec.com

Research Head: Utpal Choudhury, 022-30272834, utpal.choudhury@dalmiasec.com

Dalmia Research Center is the research desk of Dalmia Securities Private Limited (the Firm), which does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.

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May 2011

Sector Focus
Sector Watch- FMCG COC
DABUR BATAINDIA HINDUNILVR ITC COLPAL

Sector Watch- Cement Rollover Price 103.4 456.8 308 186.05 909.15 6.1% 13.1% 24.5% 38.1% 8.4%
AMBUJACEM ACC GRASIM INDIACEM ULTRACEMCO COC -8.8% 1.5% 11.9% -6.8% -31.7% OI 6687 4398 3334 3459 2838 OI CHNG -2.71% -10.70% -17.39% -1.00% 0.11% Rollover Price 130.75 993 2262.5 84.65 1027.35 24.5% 27.7% 29.3% 8.7% 21.5%

OI 1102.5 688 19558 12636 180

OI CHNG -2.2% -5.6% -4.7% 8.1% 0.0%

22.6% 9.6% 34.8% 14.9% 24.0%

FMCG stocks showed significant increase in rollover compared to other sectors this month. ITC and HINDUNLVR completed maximum rollover among peers, while DABUR witnessed the least rollover of only 6% so far. FMCG counters have outperformed the index over the last one month.

Cement stocks have corrected more than index in the last one month. Cement stocks observed mainly short rollover over the last month. All the F&O cement counters have completed more than 21% rollover so far except INDIACEM. ACC observed mainly short rollover except three occasions.

Sector Open Interest: As on Prev month same day OI & Last OI

20.55% 18.61%

20.00%

160,000
14.71%

140,000

10.36% 7.13%

10.00%

120,000
1.92% 1.47%

4.11%

100,000
-2.31% -4.37% -5.80% -4.72%

-0.46% -2.01% -4.92% -8.09% -9.90% -2.73%

0.00%

80,000

-10.00%
-12.18%

60,000

-11.72%

40,000
-19.72% -20.00% -21.93%

20,000
-26.96%

Brevarages Fin. Services BioTech Software Telecommunication Eng.& Component Metal Fabrication Elec. Equipment Transportation Auto Real Estate Food Chemicals Oil& Gas Pharma FMCG Cement Banks Electric Media Hotel Steel Mining

-30.00%

Prev Month same day OI

OI

OI CHNG (RHS)

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May 2011

F&O Over The Month

Total Futures Market Volume:
Future Volume Nifty (RHS)

Futures Repose:

5900 5800 5700 5600

1600000 1400000 1200000 Volume (Lots) 1000000 800000 600000 400000 200000 0 29-Apr-11 3-May-11 5-May-11 9-May-11 11-May-11 13-May-11 17-May-11 19-May-11

5500

5400 5300

Futures market witnessed no clear trend. It first accumulated short positions followed by short covering and then few long squaring sessions. Futures market volume increased by 23% since the starting of the month. The market wide average COC of current series has gone up 13% on account of short covering. Bank-Nifty index observed huge short positions in current series in the starting of the month. Futures market is loaded with short positions which may provide further boost to the market. The Nifty may go above 5550-level and sustain there on the back of short covering.

Options Freewheel:

14.0% 12.0% 10.0%

Market wide Futures Open Interest and COC:

2,400,000 2,200,000 2,000,000 OI (lots) 1,800,000 1,600,000 1,400,000 29-Apr 11-May 13-May 17-May 19-May 3-May 5-May 9-May

8.0% 6.0% 4.0% 2.0% 0.0%

Market wide PCR remained below 1 during the month except three starting sessions. India VIX (volatility index) is constantly moving between 19-22%. Put open interest has been more or less at the same level in the latter half of study period while call open interest has increased. FIIs have been long in index options except few occasions.

COC

Future OI

Avg. COC (RHS)

Put Call Open Interest at different Nifty levels:

2400000 5800 5700 1800000 OI 5600 Nifty 5500 5400 600000 29-Apr 11-May 13-May 17-May 19-May 3-May 5-May 9-May 5300

Market-wide PCR at different Nifty Levels:

1.4 1.3 1.2 1.1 1.0 0.9 0.8 0.7 0.6 0.5 29-Apr 3-May 5-May 9-May 11-May 13-May 17-May 19-May 5800 5700 5600 5500 5400 5300

1200000

Call OI

Put OI

Nifty (RHS)

PCR-Volume

PCR-OI

Nifty (RHS)

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May 2011

Nifty F&O Over The Month

Put 6100 6000 5900 5800 5700 5600 5500 5400 5300 5200 5100 5000 8,000,000 6,000,000 4,000,000 2,000,000 0 2,000,000 4,000,000 6,000,000 8,000,000 Call Put 5900 5800 5700 5600 5500 5400 5300 5200 5100 5000 4900 4800 8,000,000 6,000,000 4,000,000 2,000,000 0 2,000,000 4,000,000 6,000,000 8,000,000 10,000,000 Call Put 5900 5800 5700 5600 5500 5400 5300 5200 5100 5000 4900 4800 5,000,000 5,000,000 15,000,000 10,000,000 10,000,000 0 Call Put 5900 5800 5700 5600 5500 5400 5300 5200 5100 5000 4900 4800 5,000,000 15,000,000 10,000,000 5,000,000 10,000,000
Nifty

Call

29 April

6 May

13 May

20 May

Nifty Put-Call Concentration

Nifty Future OI & COC

650,000 600,000 OI (Lots) 550,000 500,000 450,000 400,000 29-Apr 11-May 13-May 17-May 19-May 3-May 5-May 9-May

18% 13% 8% COC 3% -2% -7% -12%

Nifty F&O Finesse: Since the beginning of the month Nifty future open interest increased by 24%. Open interest showed short accumulation followed with short covering and some weak long squaring. Among Nifty options, maximum call open interest has been built at 5500 while maximum put open interest at 5400 strike.

Fut OI

Nifty COC (RHS)

Nifty Future Positions over Last Month

5800 47,000 27,000 5700 5600 5500 5400 ` 29-Apr-11 2-May-11 3-May-11 4-May-11 5-May-11 6-May-11 9-May-11 10-May-11 11-May-11 12-May-11 13-May-11 16-May-11 17-May-11 18-May-11 19-May-11 20-May-11 5300

Change in OI

7,000 -13,000 -33,000 -53,000 -73,000

Fresh Long

Fresh Short

Long Squaring

Short Cov ering

Nifty

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15,000,000

Expiry Preview
May 2011

FIIs Position Over Month:

Index Future Positions of FIIs :
5800 Addition/ Reductino in OI 65,000 40,000 15,000 5700 5600 5500 5400 5300 29-Apr-11 3-May-11 5-May-11 9-May-11 11-May-11 13-May-11 17-May-11 19-May-11

FIIs Primarily Shorts in Futures

Nifty

In the starting of the month, FIIs witnessed significant accumulation of short positions in index as well as in stock futures. While in the last week they have been primarily long in futures.

-10,000 -35,000

We expect some support to the markets from FIIs shorts positions.

Fresh Long Short Cov ering

Fresh Short Nifty

Long Squaring

FIIs were net sellers of `48,025 mn since the 29th April in index futures whereas they

Stocks future positions of FIIs over month:

14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 -2,000 -4,000 -6,000 -8,000 -10,000 29-Apr-11 3-May-11 5-May-11 9-May-11 11-May-11 13-May-11 17-May-11 19-May-11 5780 5700 5620 Nifty 5540 5460

bought ` 15,748 mn in stock futures during the study period. During the month, FIIs also bought ` 60,057 mn worth of index options and sold stock options worth ` 623 mn.

Addition/ Reductino in OI

In case of cash, FIIs were net sellers to the tune of ` 34,080 mn during the period, which is a matter of concern.

5380 5300

Fresh Long Short Cov ering

Fresh Short Nifty

Long Squaring

Net cash trade of FIIs at Different Nifty Levels

4,000 2,000 Net Cash Trade (Rs m) (2,000) 5500 (4,000) (6,000) (8,000) (10,000) 29-Apr 11-May 13-May 17-May 19-May 3-May 5-May 9-May 5400 5300 5200 5800
25000

Net F&O Trade

5700 5600
Rs. In Mn.

20000 15000

2-May-11

3-May-11

4-May-11

5-May-11

6-May-11

9-May-11

10-May-11

11-May-11

12-May-11

13-May-11

16-May-11

17-May-11

18-May-11

19-May-11

-5000 -10000 -15000 -20000

Net Cash Trade

Nifty

Net F&O Trade

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20-May-11

29-Apr-11

Nifty

10000 5000 0

Expiry Preview
May 2011

Rollover Preview

Rollover Roar: Changes in Open interest during Last Expiry

2500000 2000000 OI (Lots) 1500000 1000000 500000 0 Thu Mon Tue Prev ious Month Wed Thu

Futures market completed 21% rollover, which is higher than the last three months same day rollover. Frontline stocks on the other hand completed 26% rollover.

Next series COC increased to 7% from 4% in the beginning of the month indicating dominance by long rollover.

Current Month

During last expiry around 78% open interest rolled over and the remaining expired, which was almost same with March series expiry.

Changes in Open Interest During Last Expiry (%)

100% 80% 60% 49% 51% 40% 29% 20% 0% Thu Mon Tue Wed Thu Current Month 19% 37% 22% 81% 71% 63% 78%

Banking sector witnessed higher rollover than last month same day rollover, while Auto sector saw more or less same rollover as last month.

Oil & Gas, Cement and FMCG space have showed significant increase in rollover compared to last two months Ex-5 day.

Nifty Future completed 18% rollover so far, which is higher than last month same day rollover of 16%.

Rollover Cogwheel: June series is witnessing decent rollover so far, mainly dominated by long roll. This indicates bullish
Prev ious Month

sentiment in the market going forward.

Future Open interest & Average COC

2500000 2000000 OI 1500000 1000000 500000 0 21-Apr 25-Apr 26-Apr 27-Apr 28-Apr 29-Apr 2-May 3-May 4-May 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% COC

Sectoral Rollover completed (Expiry-5th day):

Sectors Auto Banks Cement Chemicals FMCG Power Metal Oil&Gas Pharma Real Estate Software Telecom May series 20.5% 25.9% 23.4% 10% 29.5% 27.2% 24.6% 28.8% 21.5% 22.1% 16.4% 18%
April Series March series

Current OI Curr. Av g COC

Nex t OI Nx t. Av g COC

21% 21.9% 17.4% 10.7% 23.4% 26.1% 27.5% 21.6% 14% 19.5% 21.9% 15.9%

15.6% 23.4% 15.3% 15.8% 22.1% 22.6% 24.7% 20.7% 20.4% 27.4% 23.6% 23.9%

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May 2011

Rollover Analysis:
Current Month Next Month

OI LOT
TOTAL NIFTY STOCKS NIFTY BANKNIFTY RELIANCE SBIN TATASTEEL ICICIBANK TATAMOTORS INFOSYSTCH LT JSWSTEEL HEROHONDA HINDUNILVR RELINFRA HDFCBANK NTPC PFC BHEL DLF IFCI JPASSOCIAT SUZLON HINDALCO AXISBANK GTL PUNJLLOYD LICHSGFIN RCOM HDIL BHARTIARTL UNITECH TCS GMRINFRA IDFC HINDPETRO CAIRN PANTALOONR STER HDFC RELCAPITAL MARUTI 1735068 593724 491093 70491 46801 41599 29786 27073 26665 25355 21875 21351 19618 19558 19407 18991 18149 17361 17305 16766 16741 15957 15554 13406 13193 13100 12265 12218 11480 11317 11145 11145 10935 9750 9535 9274 9232 9206 8711 8551 8484 8217

Change in OI
-80317 -30210 -17848 -2924 -3895 -1476 -1873 481 -1899 -1854 -4299 -2952 -227 -958 -988 915 -40 -93 309 -1710 -736 -686 -1409 -890 -506 -56 -1066 -506 -674 -129 -57 -587 -535 -230 -1868 -223 -451 -1235 -207 -956 -518 52

OI Chng%
-4.4 -4.8 -3.5 -4 -7.7 -3.4 -5.9 1.8 -6.6 -6.8 -16.4 -12.1 -1.1 -4.7 -4.8 5.1 -0.2 -0.5 1.8 -9.3 -4.2 -4.1 -8.3 -6.2 -3.7 -0.4 -8 -4 -5.5 -1.1 -0.5 -5 -4.7 -2.3 -16.4 -2.3 -4.7 -11.8 -2.3 -10.1 -5.8 0.6

Day's Day's Rolvr Rollover %

80317 30210 17848 630 2919 1476 463 1121 1854 958 2395 227 958 988 40 38 1146 736 686 1409 742 506 56 442 506 674 129 57 587 535 230 358 223 451 1235 207 686 359 4.40% 4.80% 3.50% 0.90% 5.80% 3.40% 1.50% 3.90% 6.80% 3.70% 9.90% 1.10% 4.70% 4.80% 0.20% 0.20% 6.20% 4.20% 4.10% 8.30% 5.20% 3.70% 0.40% 3.30% 4.00% 5.50% 1.10% 0.50% 5.00% 4.70% 2.30% 3.10% 2.30% 4.70% 11.80% 2.30% 7.20% 4.00%

Change in OI
97327 35888 22696 630 2919 1526 463 1549 1121 2359 958 2395 943 1358 1438 1315 2238 38 738 1146 1083 940 1839 742 865 103 442 1135 979 244 528 1007 570 290 358 234 526 1644 294 686 359 142

OI LOT NXT
442881 195409 110827 7305 14026 8871 10353 15248 8903 9393 9557 4784 3600 6353 3816 10558 9289 3770 7717 4118 3784 3240 8140 2499 3461 289 6059 2063 3716 1591 1446 5162 1700 999 1774 2063 6153 3617 956 2724 1426 2822

ROLLOVER COR (%) (%)

19.5 23.7 18.4 9.4 23.1 17.6 25.8 36 25 27 30.4 18.3 15.5 24.5 16.4 35.7 33.9 17.8 30.8 19.7 18.4 16.9 34.4 15.7 20.8 2.2 33.1 14.4 24.5 12.3 11.5 31.7 13.5 9.3 15.7 18.2 40 28.2 9.9 24.2 14.4 25.6 5.7 5 1.1 -2.8 6.3 5.4 1.4 -5.3 -5.4 4.5 5.1 6.7 -7.1 -4.7 5.4 -2.3 6.8 -0.6 3.6 3.7 6.6 6 2.6 6.6 -3.8 6 0.8 6.5 5.9 4.7 4.7 5.3 2.4 6.5 5.6 5.2 6.8 9.7 5.1 -5.8 5.2 -6.1

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Expiry Preview
May 2011

Strategic Intent
NIFTY NIFTY P/E Valuation has touched the higher side

6400 6100 5800 5500

30

25

20

15
5200

10
4900

5 1/2/06 7/2/06 1/2/07 7/2/07 1/2/08 7/2/08 1/2/09 7/2/09 1/2/10 7/2/10
4600 11-May-10 11-Mar-11 11-May-11 11-Oct-10 11-Nov-10 11-Dec-10 11-Jun-10 11-Jan-11 11-Jul-10 11-Sep-10 11-Feb-11 11-Aug-10 11-Apr-11

Monsoon Matters: The progress of monsoon in the coming days coupled with FIIs inflow/outflow will decide the market direction. On the other hand, technically if Nifty sustains above 5540 level in coming sessions then market may move northward.

Remaining partial hedged below 5620 of Nifty: Going ahead, we recommend remaining long above 5400 of Nifty. Valuation wise, the Nifty may find support at the upper end of the PE band as witnessed in past two years.

Contact Details Institutional Relations

R F Jetha Malay Kampani President, Institutional Operation Vice Presiden - Institution rfj@dalmiasec.com malay.kampani@dalmiasec.com +912230272815-17 +919831246854

Dalmia Securities Private Limited

Ideal Plaza 11/1 Sarat Bose Road, Kolkata 700020 Phone No: 91-33-22806544-49, Fax No. 91-33-22806643 Website www.dalmiasec.com Khetan Bhavan, Flat No. 17, 2nd Floor, 198 Jamshedji Tata Road Churchgate, Mumbai 400020 Phone No: 91-22-30272815-17, Fax No 91-22-30272820

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