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Research Desk Retail Broking

MONTHLY TRADING STRATEGY: ROLLOVER ANALYSIS


December 4, 2012

December December 4, 2012 FNO Trading Strategy for the December Series
, 2012
TRADING STRATEGY FOR DECEMBER SERIES Buy on Declines: We expect, the markets to trade on a positive note in the December series considering the bullish view reflected during rollovers. However, in case of any declines due to profit booking after a sharp run-up in the last few sessions, we suggest to buy on declines. Rate cut (Catalyst or spoiler): Expectations of a rate cut in the RBI policy meet on 18th Dec, could trigger for buying in the rate sensitive sectors like Auto, BFSI, Construction & Infrastructure, Real-estate. Beaten-down stocks: Stocks that were beaten down due to higher interest expenses could witness buying interest, as they are likely to benefit from the interest rate downward cycle. PSU Banking stocks are likely to benefit from the treasury gains as well as the improvement in the asset quality, once the interest rates resume its downward cycle. Metal stocks are likely to see buying interest at bottom levels, on any signals over the revival in the base metal demand due to recovery in the global economy, especially in the US and China. OUR PICKS FOR THE MONTH Nifty (View-Bullish): Buy Nifty December 5900 CE between 90-92 and Sell December 6000 CE between 47 48 and Sell December 6100 CE between 21-22. The break-even for the Call ladder strategy would be around 6176. As the strategy has two higher strikes on the short side, stop-loss for the strategy should be maintained at 6180-6200 levels. Reliance Industries (View-Bullish): Buy Reliance December Futures between 806-808 and Buy December 800 PE between 13-15. The protective put strategy would breakeven at 823. SBI (View-Bullish): Buy SBI December 2300 CE between 37-39. The break-even for the long Call strategy would be at 2339. Hindalco (View-Moderately Bullish): Buy Hindalco December 120 CE between 3.10-3.20 and Sell December 130 CE between 0.90-1.00. The bull-call spread strategy would break-even at 122.30. 1 NIFTY DEC FUT OI & BASIS NIFTY & FUT OI

ROLLOVER ANALYSIS

ROLLOVER SNAPSHOT December series has started on a firm note, amid stellar rollovers and higher rollover premiums, reflecting the bullish sentiments in the overall market. Rollovers from November to the December series which were on a subdued note till the last week of November, have seen a sharp surge in the last two trading sessions before the settlement of November series. Overall markets have seen a rollover of 84% which is higher than the last 3-month average rollover of 65% indicating higher participation levels in the broader market. Nifty Futures have seen a rollover of 85% into the December series which is higher than the last three month average of 55%. Sharp rollover on the back of a premium in upwards of 40 points indicates the traders expectations of a positive movement in Nifty in the December series. Bank Nifty futures have seen a rollover of 86% into the December series as against the last three month average rollover of 53% on the back of around 60 point premium indicating rollover of long positions. Construction & Engineering, Infrastructure, Fertilizers, Cement, Rea-estate, Media and Energy sectors have seen rollovers that are above the average rollover in the market. Software, Utilities, Automobiles and Capital goods sectors have seen lower than the average rollover of the broader market. GodrejInd, Havells, Raymond, TataComm, FederalBank, HindPetro, AuroPharma, IndiaCem, DivisLab and ABirlaNuvo have seen high rollovers among the stocks. While, MPhasis, Cipla, CESC, MCDowell-N, AndhraBank, ExideInd, SAIL, Wipro, HeroMotoCo and PunjLloyd have seen low rollover. Options activity in Nifty December series indicates trading range shifting upwards to 5700 6000 levels. Call options strikes of 5900, 6000 and 6100 strikes have seen accumulation of long positions, with 6000 strike has seen highest open interest. Put options strikes of 5800, 5700 and 5600 strikes have seen accumulation of long positions, with 5700 strike has seen highest open interest.

TRADING IDEAS FOR DECEMBER Nifty Trading strategy: Buy Nifty between 5800-5850 levels and in case of any minor correction due to profit booking after a sharp run-up, average at around 5700 and keep a final Stop-Loss at 5670, for the Targets of 5950 & 6000. Sectors to watch: Interest rate sensitive sectors, PSU Banking and Non-ferrous metals sectors could be in limelight besides other policy sensitive stocks. Stocks to watch: Bajaj Auto, Maruti, M&M, CanaraBank, DenaBank, Federal Bank, ICICIBank, SBI, UnionBank, CenturyTex, RelianceInd, Hindalco, TataSteel, JP Associate, Reliance Infra, Adani Enterprises, DLF, IDEA, TataGlobal, United Phosphorous and Wipro. 2

ROLLOVER ANALYSIS

ROLLOVER - SECTORS Previous 3 Month Average Average Rollover % Rollover% 76.13 67.55 79.11 77.19 87.94 92.52 80.84 85.65 89.56 79.88 84.53 90.27 87.13 82.13 88.29 84.69 78.46 87.35 72.26 82.12 82.78 75.43 84.01 62.98 61.19 64.95 61.44 68.63 61.29 69.58 65.67 76.98 63.12 68.39 63.15 65.93 54.80 65.43 64.10 63.09 76.66 66.37 69.15 65.24

Sector AUTOMOBILE & COMPONENTS BFSI CAPITAL GOODS & HEAVY ENGINEERING CEMENT CONSTRUCTION & ENGINEERING CONSUMER DURABLES & APPARELS ENERGY FERTILIZERS & CHEMICALS FMCG HOTELS & RESORTS INFRASTRUCTURE MEDIA METALS & MINING MISC NIFTY PHARMACEUTICALS REALTY SOFTWARE & SERVICES SUGAR TELECOM & SERVICES UTILITIES Grand Total
Source: NSE, KARVY Research, Bloomberg

ROLLOVER ANALYSIS
KARVY RESEARCH DESK RETAIL BROKING
JK Jain Head Research

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