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Anup Menon
Sanjiv Shankaran

OVERALL Trends: With war fears looming large the political situation continues to remain in a state of uncertainty. This led to some sell off in the cash markets and the negative sentiment could well persist into the future. On a week-on-week basis the BSE Sensex lost close to 4 per cent to close the week down at 3125.70 points. The cumulative loss on the index over the last nine weeks now stands at around 10.1 per cent. The trend at the National Stock Exchange was in line with that of the cash market. The S&P CNX Nifty closed the week down by around 3.6 per cent over the previous week at 1029 points.

Trading Statistics: Trading interest in the index futures market displayed mixed trends. Total volumes at the NSE improved by around 12 per cent to 29,892 contracts as compared to 26,667 contracts traded the week before. In the same time frame total volumes at the BSE declined by around 24 per cent to 10,900 contracts as compared to 14,250 contracts traded the week prior.

Index Futures: Trading in the index futures market was relatively brisk during the week. Traders who had forecast the persistence of tensions and had taken short positions to hedge their spot position would have done well. Trading activity is relatively restricted to the one-month contract. During the week the May contract matured. In the Nifty family, the June contract saw volumes increase by around 71 per cent to 8,604 contracts as compared to the previous week. The June contract is likely to be the most actively traded contract over the next few weeks as it is in the one-month trading range. Activity in the Sensex one-month contract is relatively low as just around 450 contracts were traded during the week. Traders can consider taking positions in the Nifty contract and rather avoid the Sensex contracts given the higher level of liquidity risk attached to them.

Index Options: Trading in index options was rather limited during the course of the week. Only one call option managed to find a place among the list of top traded calls. In comparison two puts managed to find a place in the list. Therefore investors seem to be more concerned about protecting the downside. The June 1040 call was the most actively traded call clocking aggregate volumes of around 649 contracts. Going by the latest closing price of the index the option is OTM. The June 1040 put was also the most actively traded put contract. It clocked aggregate volumes of around 548 contracts. It is ITM. Though the put call ratio seems to indicate bullishness, the underlying trend looks weak.

Stock Options: Among the options on individual stocks the most actively traded calls were on Satyam Computers. Among the calls the top 6 most actively traded options were on Satyam Computers. Further among the open contracts the June 220 and June 240 were the most active. While the former is ITM the latter is OTM. They clocked aggregate volumes of around 2037 and 1739 contracts respectively. Among the puts the June 220 call was the most active clocking volumes of around 1652 contracts. It is OTM at present. Overall activity in the stock options market was fairly brisk. Other stock options that attracted market interest were Infosys Technologies, HPCL and Reliance among others.

In the preceding week's single stock futures sessions, both May and June contracts attracted an equal extent of trading interest. The development stands out because, generally, contracts that terminate the earliest attract most interest. For example, in June, the most liquid contracts are likely to be the ones that terminate in June. Contracts that terminate in July and August are likely to evoke relatively limited interest.

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