Technical Picks | June 15, 2013

Policy action to dictate market movements
Sensex (19178) / Nifty (5808)
The week started off on a muted note in-line with the quiet trading mood across the globe. On Tuesday, the bulls eventually gave up all hopes and we witnessed massive intraday fall of nearly two percent. This was mainly on the back negative developments across all major global bourses and substantial weakness in the Rupee. The pessimism continued till Thursday's session which led indices to fall below the previously mentioned 61.8% Fibonacci retracement level at 19022 / 5764 5764. However, very surprisingly, our benchmark indices opened with more than a percent upside gap on Friday morning and continued to advance as the day progressed. During the week, most of the sectors ended in the red with the Consumer Durables, Metal, Banking and Realty counters leading the decline; whereas the only sector Oil & Gas ended in the positive territory with nominal gains. The Sensex and the Nifty shed 1.29% and 1.23%, respectively, over the previous week's closing.
Bullish Island Reversal

Exhibit 1: Nifty weekly chart

Source: Falcon

Exhibit 2: Nifty Daily chart

Pattern Formation
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The '20-week EMA' and the '20-day EMA' are placed at 19359/ 5869 and 19500/ 5909 levels, respectively. The '89-day EMA' and the '200-day SMA' are placed at 19417/ 5885 and 19128 / 5800, respectively. The daily 'RSI' and 'Stochastic' momentum oscillators are signaling a positive crossover. The Monthly 'Shooting Star' Japanese candlestick pattern has been activated. The daily chart now depicts a bullish 'Island Reversal' pattern.
Source: Falcon

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overall developments across the globe, initially we expect our benchmark indices to bounce towards the stiff resistance zone of daily '89 EMA' and '20 EMA', which are placed at 19417/ 5885 and 19500/ 5909 5909, respectively. The positive placement of the daily 'RSI' and 'Stochastic' momentum oscillators augments this outlook. Further, only a sustainable move beyond last week's high of 19586 / 5932 would imply that the intermediate down trend is under threat. On the flip side, a sustainable move beyond below the weekly low of 18765 / 5683 would negate the bullish implication of the 'Island Reversal' pattern. This may trigger immense selling pressure in the market and hence, indices may slide towards 18636 - 18450 / 5638 - 5584 levels. Central banks across the world declare their monetary policies in the coming week and as a result volatility may rise going forward. Hence, we advise traders to stay light on positions and trade with strict stop losses.

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Future Outlook
During the week, the bulls managed to garner some strength in last session after a dismal show for the first four days. On Friday, we witnessed a gap up opening which has led to the formation of a bullish 'Island Reversal' pattern. This pattern is considered as a strong trend reversal pattern, if it occurs at a significant support or resistance level. In the present scenario, the placement of the 'Island reversal' is not too convincing to conclude a very bullish outlook. Nevertheless, considering

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Technical Picks | June 15, 2013

Weekly Pivot Levels For Nifty 50 Stocks
SCRIPS
SENSEX NIFTY BANKNIFTY ACC AMBUJACEM ASIANPAINT AXISBANK BAJAJ-AUTO BANKBARODA BHARTIARTL BHEL BPCL CAIRN CIPLA COALINDIA DLF DRREDDY GAIL GRASIM HCLTECH HDFC HDFCBANK HEROMOTOCO HINDALCO HINDUNILVR ICICIBANK IDFC INDUSINDBK INFY ITC JINDALSTEL JPASSOCIAT KOTAKBANK LT LUPIN M&M MARUTI NMDC NTPC ONGC PNB POWERGRID RANBAXY RELIANCE RELINFRA SBIN SESAGOA SUNPHARMA TATAMOTORS TATAPOWER TATASTEEL TCS ULTRACEMCO R2 19,880 6,020 12,609 1,279 181 4,682 1,438 1,825 684 302 198 391 300 394 334 210 2,231 317 2,850 786 887 699 1,731 109 598 1,189 154 531 2,563 344 321 68 780 1,451 794 1,012 1,640 122 154 332 793 114 395 810 404 2,089 162 1,066 313 94 307 1,585 1,945 R1 19,353 5,859 12,148 1,242 178 4,563 1,354 1,767 654 295 187 374 295 386 316 198 2,195 307 2,798 772 849 677 1,673 103 596 1,129 146 510 2,471 336 279 64 762 1,423 778 968 1,548 115 152 321 757 110 385 800 374 2,054 151 1,008 298 86 287 1,515 1,883 PIV OT PIVO 19,059 5,771 11,902 1,218 174 4,495 1,306 1,731 638 284 180 363 290 378 306 191 2,171 300 2,764 759 827 665 1,623 97 594 1,098 142 491 2,423 330 241 62 750 1,403 764 941 1,489 110 150 313 738 108 377 788 355 2,012 145 962 289 82 276 1,475 1,844 S1 18,533 5,611 11,441 1,181 171 4,376 1,222 1,672 608 278 169 347 285 370 288 180 2,136 289 2,712 744 790 643 1,565 91 592 1,037 134 470 2,332 321 199 59 732 1,374 748 896 1,397 102 148 302 702 103 367 778 325 1,977 134 903 274 74 255 1,406 1,783 S2 18,239 5,523 11,196 1,157 167 4,308 1,174 1,637 592 267 163 336 279 362 278 172 2,112 282 2,678 731 767 632 1,515 85 590 1,006 130 450 2,284 315 161 57 720 1,354 734 869 1,338 97 146 294 683 101 359 765 306 1,936 128 858 265 69 244 1,366 1,744

Technical Research Team
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Derivatives Review | June 15, 2013

Expect range bound but volatile movements
Nifty spot closed at 5808.40 this week, against a close of 5881.00 last week. The Put-Call Ratio has decreased from 0.99 to 0.95 levels and the annualized Cost of Carry is negative 1.18% 1.18%. The Open Interest of Nifty Futures increased by 26.25% 26.25%.

Put-Call Ratio Analysis
PCR- OI has decreased from 0.99 to 0.95 levels. The fall in ratio was due to significant amount of buildup observed in 5700-6000 call option, while simultaneously 59006100 put option has seen considerable amount of unwinding which was much of short covering. In the week gone by 5400, 5500 and 5700 put option has also seen good amount of buildup in open interest. Highest buildup for this series is in 6000 call option and 5700 put option.

Implied Volatility Analysis
Implied Volatility (IV) for NIFTY has increased from 16.53% to 17.39%. Historical volatility (HV) is at 20.42% and that for BANKNIFTY is trading at 27.16%. Liquid counters having very high HV are OPTOCIRCUI, APOLLOTYRE, RENUKA, TITAN and JINDALSTEL. Stocks where HV are on lower side are TATACHEM, ABIRLANUVO, CAIRN, ACC and PETRONET.

Open Interest Analysis
Total open interest of market has increased from Rs 1,29,384/- cr. to Rs. 1,44,787/- cr. Stock futures open interest has increased from Rs. 29,687/-cr. to Rs. 30,014/- cr. Some of the big names which added open interest are ICICIBANK, AXISBANK, HEROMOTOCO, KOTAKBANK and TATASTEEL. Open interest was shed in large cap names like WIPRO, MARUTI, BPCL, CIPLA and AMBUJACEM.

Cost-of-Carry Analysis
Nifty futures closed at a discount of 2.45 points against the premium of 15.65 points to its spot. Next month future is trading with premium of 15.40 points. Liquid counters where CoC is high are UNITECH, MCDOWELL-N, OPTOCIRCUI, PTC and IVRCLINFRA. Stocks with negative CoC are DENABANK, VIJAYABANK, UNIONBANK, BANKINDIA and IOB.

Derivative Strategy
Scrip : HDFC View: Mildly Bullish Buy/Sell BUY SELL
BEP - `915/LBEP - `845/Max. Risk: Unlimited
If HDFC continues to move above UBEP .

CMP : `824.25

Lot Size : 500

Exercise Date (F & O) : 27th June 2013 Expected Payoff
Closing P rice Price (`) Expected Profit/L oss rofit/Loss

Strategy: Ratio Call Spread Scrip HDFC HDFC Strike Price 840 880 Series JUN JUN Option Type CE CE Buy/Sell Rate (`) 11.00 3.00

Qty 500 1000

820 840 860

(`5.00) (`5.00) `15.00 `35.00 `15.00 (`5.00)

Max. P rofit: `17,500/Profit:
If HDFC closes at Rs.880 on expiry.

880 900 920

NO TE : Profit can be booked before expiry if HDFC moves in favorable direction and time value decays. NOTE TE:

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Weekly

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Ratings (Returns) :

Buy (> 15%) Reduce (-5% to -15%)

Accumulate (5% to 15%) Sell (< -15%)

Neutral (-5 to 5%)

Weekly

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