August 12, 201 Weekly view: We reiterate index to trade positive for target of 8800/9000 with support at 8500 Research analyst Amit Gupta amit.gup@icicisecurities.com Azeem Ahmad azeem.ahmad@icicisecurities.com Raj Deepak Singh rajdeepak.singh@icicisecurities.com Nandish Patel nandish.patel@icicisecurities.com c secu es co
Deal Weekly Team Recommendations At Your Service Reliance Industries (RELIND) : Carried forward Buy Reliance Industries August Future in the range of 1010-1015. Target 1070. Stop Loss 979 Rationale: After witnessing intermediate profit bookings since mid-july, Reliance Industries seems to be making an attempt towards its higherh band of 1070. The first trigger in the form of closure of short OTM Call options is visible ibl in strikes ranging from 1040-1070. The short covering trend has continued in the stock from the time it bottomed out near 940 in June. Since then, there has been short closure of 15%. Looking at the current OI trend, there is scope for further short covering. Hence, we recommend buying the stock for a target price of 1070. 2
The Week Gone By
Consolidation continues near 850... Deal Team At Your Service The Nifty managed to end the week almost flat as buying was seen on Friday. Theindexerodedmostlossesoffirst three sessions of the week. Profit booking post the unchanged monetary policy was arrested near our stated support of 8550 and Nifty witnessed another round of up move from these levels. Sectorally, apart from technology and FMCG most sectors witnessed profit booking. Banking and pharma indices have closed the week in red. The mid cap index managed to close the week almost flat while small cap index closed the week with the loss of 2%. The volatility index moved even lower during the week and on closing basis Index VIX closed at the lowest level of 201 at 13.8. The low level of volatility indicates expectations of limited downsides in Nifty. We believe only a sustained move above 15.50 levels may trigger some profit booking in equities. FIIs inflows continue to provide support as Nifty consolidated around 800 levels. They bought more than 2200 crore in equity space. The continuous inflow in equities and debt markets helped INR to show significant resilience and INR closed the week almost flat. Major positive moves were seen in Adani Ports (10%), Tata Power (5.5%), SBI (4.5%), Axis Bank (4.1%) and TCS (3.53%) Major laggards of last week were Grasim(-13.1%), Idea (-11.%), Lupin(-5.7%), Bharti Infratel (-5.4%) and Sun Pharma (-5.1%) Nifty highlights hli h Week on week Spot Fut Basis Tot Fut OI PCR OI PCR Vol ATM IV (%) Current 872 879 2.3 28,998,075 0.9 1.08 13.4 Previous 884 8708 5.1 2,7,975 0.89 0.78 14.2 Change (%) (0.1) (0.3) - 8.7 - - - * Nifty total futures OI mentioned in the current field is the provisional figure 4
Outlook for coming week
Trade positive for target of 8800/9000 with support at 8500 As mentioned last week, the Nifty is likely to trade with a positive bias with major support at 8500, which is the highest Put base. Some consolidation in the index cannot be ruled out as the major domestic events are already over. The highest Call base for the index is placed at the 9000 strike, which remains the likely positional target in coming weeks Immediate support for the index in the coming week is placed at 800. Above this level, the index is expected to trade with a positive bias and stock specific moves would continue amidst the quarterly results outcome. Nifty futures have started the August series with quite high open interest base. The current OI is the highest since March 2015. These are long positions that have been carried forward at higher roll spread. We have not seen any major liquidation in the Nifty futures yet. Robust FII inflows have resulted in the sustenance of the markets at these levels. The continuance of the same would result in Nifty holding above 800 levels. l Sectors like Auto, FMCG and finance have been performing well. The midcap stocks from these sectors can be looked at from a buying perspective. Nifty options build-up up for August series 7 Call OI Put OI 5 OI in Millions 4 3 2 1 0 8400 8500 800 8700 8800 8900 9000 9100 9200
Bank Nifty : Target at 19500 with support at 18500 The index remained subdued and witnessed stiff hurdle above the sizeable Call base of 19000. However, for the week, it ended almost flat after hovering around 19000 levels. The support of 18500 remained intact. Even after a leg of profit booking the index remained firm above these levels. The selling in PSU banks got arrested after the SBI quarterly numbers, which rallied close to 10% post the result announcement Going forward, the key pivotal level is the Call base of 19000. The open interest in 19000 Call strike remains intact however, on the future side some closure of positions was seen. We feel with support of recent lows, the Bank Nifty index is well placed to test the highest call base levels of 19500 and the participation is likely to continue in mid-cap banking stocks along with Axis Bank and select PSU banks. The price ratio of Bank Nifty/Nifty has witnessed a strong support near 2.1 levels and on the back of participation by banking stocks, the ratio again saw a rally towards 2.19 levels. We feel, the rally in select banking stocks is likely to continue which will provide cushion to Bank Nifty index and on the higher side, the ratio is likely to retest the levels of 2.22 Bank Nifty options build-up for August series 500000 Call OI Put OI 450000 400000 350000 300000 250000 200000 150000 100000 50000 0 18500 1800 18700 18800 18900 19000 19100 19200 19300 19400 19500 7
Deal Robust Team FII buying At continued Your Service in equity segment During the week, strong FII inflows continued in emerging markets and it helped them to stay resilient despite of sharp surge in price volatility for crude. During the week, FIIs poured in over US$337 million (10% higher than inflows of last week of US$300 million). Strong inflows in other EMs is also visible, led by Taiwan, Indonesia and South Korea with inflows of US$501, US $470 million and US$301 million, respectively In index futures also, FIIs long creation continued albeit at a lower pace. The Nifty has started the August series with higher open interest in comparison to the last couple of series but long index future trend continued and FII index future buying was over US$ 170 million in the week under review. With the Nifty at the highest level in over a year, the hedging quantum via buy index option is picking up. In the week the FIIs bought Index options worth over US $ 577 million Despite the rate hikes hope alive in the US markets the Dollar Index continued to face resistance at higherh levelsl as the rate hike expectation for September meeting has still not risen sharply. The softness in dollar is fuelling the riskon sentiment for EM asset classes and the focus on EM s could continue as the European markets are still in weak mode and the commodity prices are still holding up. FII buying continues in cash segment FII fund inflow seen in EMs FII DII Date Index Fut Stock Fut Index Opt Cash Cash 5-Aug 72.35-2.28 300.73 73.9 92.72 8-Aug 0.85-92.14 12.09 17.24-131.84 9-Aug 23.47-18.75 12.10 23.23-91.79 10-Aug 13.94-8.8-54.47 4.10-112.42 11-Aug 09 0.9-143.93 77.7979-93.52 In US $ mil llion 1000 800 00 400 200 0 Taiwan Korea S Th hailand Indo onesia India Phillip ppines Brazil 8
S&P 500: Target at 2200 with support at 2150 Deal Team At Your Service S&P 500: Target at 2200 while support is at 2150 S&P consolidated at record highs during the week. The index is up 3.5% already for the July series. With a strong set of 7 data and stable set of Q2 numbers, the index is likely to move higher 5 The options space for the August series is showing a target of 4 3 2200 levels while 2150, looks like the immediate support 2 level. 1 As expected US Fed kept the rates unchanged. which would 0 support equity markets OI Millions S&P: Key support near 2150 Call OI Put OI 2120 2130 2140 2150 210 2170 2180 2190 2200 2210 2220 Dax : 10500 immediate support Dax: Likely to move towards 10900 The Dax has been able to recover above crucial levels of 10500. We expect the index would find support at these levels. The highesth Call base for August series was placed at 10000 and the index has come above this level, which is leading to short covering in the short-term OI in Th housands 70 0 50 40 30 20 10 0 Call OI Put OI 9500 900 9700 9800 9900 10000 10100 10200 10300 10400 10500 9
Deal Dollar weakens Team as At rate Your hike probability Servicefalls, rupee is expected to gain on higher FII flows For the week, US dollar lost against most of the currencies with Dollar index at 95.88 levels from 9.19 last week as even on upbeat August employment data as global concerns continue to linger. GBP continues to extend losses against US Dollar at 1.2950 levels from 1.3073 as weaker manufacturing data & Brexit concerns continue to weigh. We expect GBP to face resistance at 1.3070 for 1.2800 levels. We suggest to short GBPINR at 88.0 for 85.50 with stop above 89.0 During week 7 Call OI has seen some liquidation while position build up is observed in 7.50 Call OI which is highest Call OI. While.50 Put OI has also seen some closure. In futures also, OI was seen gaining as rupee strengthened below 7 levels. F&O structure set up suggests rupee will gain support on weakening near 7.50. We suggest going short in US$INR August future near 7.50 with stops above 8.10 for target of.50. US$INR August series options build-up EM & DM Currency performance Currency cmp 5/8/201 % change status Indonesia Rupiah 1311 13117-0.01 Appreciated Phillipines Peso 4.705 4.91-0.44 Appreciated Brazilian Real 3.1444 3.155-0.7 Appreciated S.African Rand 13.4147 13.727-2.28 Appreciated Turkish Lira 2909 2.909 2.9987-1.2 12 Appreciated Taiwan Dollar 31.39 31.491-0.39 Appreciated Thailand Bhat 34.8 35.08-0.80 Appreciated India Rupee.8225.772 0.07 Depreciated Taiwan Dollar 31.39 31.491-0.39 Appreciated Russia Ruble 4.228 5.489-1.89 Appreciated Swiss Franc 0.975 0.9807-0.58 Appreciated Chinese Yuan.439.03-0.25 Appreciated Canadian Dollar 1.2974 1.3172-1.50 Appreciated Austrailian Dollar 0.787 0.719 0.89 Appreciated UK GBP 1.2975 1.3073-0.75 Depreciated Eurozone Euro 1.114 1.108 0.49 Appreciated Japanese Yen 102.02 101.82 020 0.20 Depreciated S. Korean WON 1101.33 1110.7-0.84 Appreciated US$INR future price and OI chart 8 Options OI in 00's 400.00 4100.00 300.00 3100.00 200.00 2100.00 100.00 Calls OI Put OI Futures OI in 000's 3700 3200 2700 2200 1700 7 5 1100.00 00.00 100.00 5.00 5.50.00.50 7.00 7.50 8.00 8.50 9.00 9.50 70.00 1200 1-May-1 23-May-1 30-May-1 -Jun-1 13-Jun-1 20-Jun-1 27-Jun-1 Fut OI 4-Jul-1 11-Jul-1 18-Jul-1 INR fut 25-Jul-1 1-Aug-1 8-Aug-1 4 10
Deal Stock Team options OI At activity. Your Service Top liquid stock options High Open Interest Additions Calls Puts Stock Expiry Strike OI in Contract Chg in OI Stock Expiry Strike OI in Contract Chg in OI LUPIN 25-Aug 1700 2,95 2318 MARUTI 25-Aug 4800 7 593 LT 25-Aug 1550 2,430 777 RELIANCE 25-Aug 1000 1,041 585 SUNPHARMA 25-Aug 820 1,021 773 ASHOKLEY 25-Aug 85 98 440 HEROMOTOCO 25-Aug 3500 94 754 HCLTECH 25-Aug 800 420 391 IDEA 25-Aug 100 727 98 TCS 25-Aug 2700 419 33 High Open Interest Closures Calls Puts Stock Expiry Strike OI in Contract t Chg in OI Stock Expiry Strike OI in Contract t Chg in OI LUPIN 25-Aug 100 990 59 BHARATFORG 25-Aug 740 499-289 BANKBARODA 25-Aug 140 41 412 UNIONBANK 25-Aug 130 19-241 HEROMOTOCO 25-Aug 3350 38 311 YESBANK 25-Aug 1180 382-204 AXISBANK 25-Aug 50 73 307 MARUTI 25-Aug 4500 585-151 HINDALCO 25-Aug 140 402 299 PNB 25-Aug 120 22-144 11
Deal Stock Team Futures Scanner At Your. Service Long build-up Stock Current OI CMP % Chg in OI % Chg in price AJANTA PHARMA 825 189.1 2.34% 3.11% STATE BANK IND 32051 244.55 23.1% 4.9% AXIS BANK LTD 19230 590.2 19.3% 3.84% SRF LTD 105 1577.1 18.99% 2.93% PAGE INDUSTRIES 1070 14083.05 17.58% 0.34% Short build-up Stock Current OI CMP % Chg in OI % Chg in price EXIDE INDUS LTD 307 173.75 107.40% -1.33% GRASIM INDS LTD 948 4549.55 50.93% -13.93% ADITYA BIRLA NUV 53 1278 43.57% -17.72% OIL INDIA LTD 59 39.1 41.23% -2.15% LUPIN LTD 1995 1577.5 40.59% -.21% Long closure Stock Current OI CMP % Chg in OI % Chg in price CONTAINER CORP 1122 1405.05-19.80% -2.70% TORRENT PHARMA 523 1478-19.79% -3.28% CADILA HEALTHCAR 203 370-13.44% -2.14% WOCKHARDT LTD 4532 810-7.02% -20.7% ALLAHABAD BANK 1245 75.45 -.4% -5.03% Short covering Stock Current OI CMP % Chg in OI % Chg in price UPL LTD 415 28.9-13.43% 2.20% SIEMENS LTD 2003 1294-10.2% 1.1% BHARAT FORGE CO 12818 82.2-9.81% 0.91% COAL INDIA LTD 347 337.95 -.87% 2.38% JUBILANT FOODWOR 3107 1189.25 -.53% 1.48% 12
Deal Forthcoming Team Events At Your Service India: 012 August: Imports and Exports YoY 1 August: Quarterly Numbers: Power Grid 19 August: Quarterly Numbers: Tata Steel Limited (E) China: 12 August: Foreign Direct Investment YoY US: 15 August: : Empire Manufacturing, NAHB Hosuing Market Index 1 August : Total Net TIC Flows< Housing Starts, CPI MoM, CPI YoY, Capacity Utilisation and Industrial Production MoM 17 August: MBA Mortgage Applications 18 August: Initail Jobless Claims, Continuing Claims and Leading Index Euro zone: 1 August : ZEW Survey Expectations 18 August : CPI MoM and YoY and CPI Core YoY UK: 1 August : CPI MoM and YoY, CPI Core YoY, Retail Price Index, RPI MoM and YoY, PPI MoM and YoY 17 August: Claimant Count Rate, Jobless Claims, ILO Unemployment Rate 18 August: Retail Sales Ex Auto Fuel MoM and YoY and Retail Sales Inc Auto Fuel (MoM and YoY) 19 August: PSNB Ex Banking Groups 13
Portfolio allocation in Derivatives Products It is recommended to spread out the trading corpus in a proportionate p 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 amount to each recommendation Quant Picks recommendations should be considered in cash segment and stoploss on closing basis. Time frame for these recommendations is 3 month. Allocation Return Objective Product wise Max allocation Frontline Mid-cap Products allocation per stock 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 Monthly Derivatives 15% 3-5% 4-7 Stocks 7-10% 10-15% 1 Month Global Derivatives 5% 2-3% 23% 4-5 45 stocks - - 1Month Quant Picks 15% 2-3% -8 stocks 7-10% 10-15% 3 Months Alpha Trader 10% 2-3% 2-3 strategy 5% - 1-2 Month Volatility Insights 10% 2-3% 3-4 Strategy 8-10% 10-15% 1-2 Month Arbitrage Opportunity 5% 2-3% 2-3 Stocks > 2.5% >2.5% Event Based Short term Futures 5% 2-3% 8-12 Stocks 1-3% 2-5% 1-2 days Positional Index Strategy 5% 3-4% 2-4 Index calls - - 1-14 days Stock option strategy 5% 3-4% 2-8 Stocks - 3-5% 1-2 days Daily Currency Future 5% 3-4% 3-5 Calls - - 1-2 days Monthly Currency Futures 5% 3-4% 34% 2-3 23 Calls - - 1 Month 14
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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 of financial products. 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