Traders work out strategies for budget rally

Wealthy stock traders — those who missed out the post-election result rally as well as the handful who tasted success — are trying to ensure they have a winning formula ready to cash in on the post-Budget swing in stock prices. These players are creating trading combinations in equity options that will help them capture extreme movements on either side. Two of the most commonly used options trading strategies by these traders are strangles and straddles, which have been put to good use by foreign institutions. Tempted by the low risk associated with these strategies, more and more wealthy traders are taking to them. The participation of retail investors in such strategies is minuscule, as they seek trading strategies to bet on the market direction rather than implied volatilities (IVs) — the expected volatility in an index or share price — a key aspect of pricing of options premium (when IVs rise, premiums rise, and the converse also holds true).Derivatives analysts have been divided over the use of these options trading strategies to bet on IVs. Some, including brokerage Sharekhan, are recommending buying straddles, which means a trader would bet on a jump in IV ahead of the Budget. In a straddle, the trader buys a call and put option each of same strike and expiry. Abhinay Jain, a derivatives analyst at Sharekhan, recommends buying one Nifty 4300 call and put option each of July expiry, prior to the Budget.
A section of analysts, including Geojit Financial Services, feels buying straddles would not be wise at this juncture, as option premiums are expensive. Higher premiums offer very little scope for any sharp upsides. Geojit is recommending buying strangles, which is again betting that there will be a jump in IVs ahead of the Budget. But, in this strategy, a trader buys an out-of-the-money call and put option. Geojit’s Alex Mathews said if the index is at 4300, the trader can buy a call option at 4700 and a put option at 4000. If the premium charged for the call and put option is Rs 50 each, then the trader will gain only if the index crosses 3900 on the downside and 4800 on the upside. But, analysts advise squaring up the strategies just before the Budget. “Traders need to buy these strategies around five days before the Budget and square it off one hour before the Budget starts, as IVs will start dipping just after the event,” said Geojit Financial Services’ derivatives head, Alex Mathews.As uncertainty recedes after the event, IVs dip. Analysts said the main risk to these strategies is if IVs do not rise ahead of the Budget, traders lose out on the premiums
(source: Economic Times )

Satyam sees six block deals at average Rs 86.84
per share

About 9.87 million shares in Satyam Computer Services changed hands in six block deals on both the stock exchanges at a weighted average of Rs 86.84 on Friday, data on the exchange showed. The shares represent more than 1 percent of the company's outstanding share capital. The details of the buyers and sellers were not immediately available. Mahindra and Mahindra's IT arm Tech Mahindra, which last month acquired 31 per cent stake in the scam-ridden Satyam for Rs 1,756 crore, will begin accepting shares from the public shareholders from tomorrow under its over Rs 1,100 crore open offer for additional 20 per cent stake. L&T and WL Ross Funds, which were bidders for Satyam's 31 per cent stake, have also agreed not to deal in the company's shares for a period of six months starting April 22. Accordingly these entities might not tender their share in the open offer.

( Economic Times )

HOUSING SECTOR BACK IN BUSINESS

Spurred by price corrections, new launches, lowering of interest rates, increase in sales inquiries and, more importantly, the newfound mantra of
‘affordable housing’, the real estate industry has started showing signs of recovery. Industry body Assocham has gone to the extent of saying that the real estate recovery is possible in the coming three months. A recent Assocham Business Barometer (ABB) survey has found that anticipating strong policy measures for the real estate in the forthcoming Budget, embattled realty majors see positive signs of recovery taking place within the next three months as affordable housing projects rev up demand and improved cash flows address their liquidity concerns. As per the survey, a whopping 92% of the respondent developers considered affordable housing as the most dominating segment to shore up the demand in real estate sector. And the policy actions supplementing the robust demand in the housing sector are likely to hold the key for a speedy recovery phase in the sector. Although the findings of this survey may seem to be too optimistic, particularly in view of the prolonged slowdown in the industry, but taking the current positive signs in the property market
into account, both industry majors as well as experts feel the real estate recovery is not a distant dream. And they have ample reasons to believe this. Firstly, after a gap of more than a year, some real ‘actions’ are being witnessed in the realty market, including the high-profile launches of some major projects coupled with increased sales inquiries. Along with that, some realty majors are also said to have recorded an overwhelming response for their upcoming projects. For instance, the Jaypee group claims to have booked all the 3300 apartments
of Jaypee Greens Aman, its new residential project in Noida, within 24 hours of their launch, while Capital Greens, DLF’s first residential project in Delhi, is claimed to have showed bookings of 1,400 flats on the first day itself. Such instances only prove that buyers and strategic investors are once again warming up to the sector, though in a restricted manner. Secondly, the Indian economy recorded a better-than-expected growth rate of 6.7% in 2008-09. The GDP growth rate, clocked in tumultuous times of global financial crisis, lends credibility to the presence of real domestic demand and consumption continuing to fuel the economy, though albeit at a reduced growth rate

IIP for April rises to 1.4%, adds to revival signs
India's industrial output rose in April, beating forecasts for a fall, driven by a pick-up in domestic demand that analysts said
confirmed nascent signs of recovery and an end to the central bank's rate-cutting cycle. Factory output in April rose 1.4 percent from a year earlier, recovering from a revised fall of 0.8 percent in March and bettering forecasts for a decline of 0.2 percent, adding to signs from China that activity in emerging economies was picking up. "Output growth almost certainly bottomed on a year-on-year basis in March and we are looking for a healthy upward trend to develop from here," HSBC economist Robert Prior-Wandesforde said. "It also fits in with our theory that the rebound in industrial production is due to domestic demand, the same case as with China," he said. Figures from China showed factory output growth rebounded in May alongside stronger expansion in credit and consumer spending, adding to hopes it can lead a global revival. Manufacturing output, which accounts for 79 percent of India's industrial production, rose an annual 0.7 percent in the first month of the 2009/10 fiscal year. The benchmark 10-year bond yield rose 6 basis points to a two-month high 6.94 percent on the data, which was seen confirming an end to the central bank's aggressive rate cuts since last October

( Economic Times )

Sensex, Nifty hit 10-month highs as bourses progress rapidly

Indian Market progressed rapidly with key indices -- Sensex and Nifty -- hitting nearly ten-month highs as investors were heartened by new
Government's economic agenda, unveiled by President Pratibha Patil in the week under review. The markets achieved new highs in sustained volatility and the Sensex closed past the 15,000-psychological level for the first time since September 2, 2008
European shares rose on Friday, with Rio Tinto leading miners higher after scrapping a planned tie-up with Chinalco, and energy companies rising on higher crude prices. Key benchmark indices indices in France, Germany and UK rose by between 0.54% to 1.58%.
. Asian shares rose on Friday as hopes for a global economic recovery drove up appetite for riskier assets, but traders were cautious ahead of U.S. monthly job data. Key benchmark indices in Hong Kong, Japan, South Korea, Singapore rose by between 0.96% to 1.42%. Key indices in Taiwan and China fell by between 0.28% to 0.48%.
U.S. nonfarm payrolls data due later in the day is expected to show employers cut 520,000 jobs in May 2009, lower than 539,000 in April 2009, and the unemployment rate is forecast to rise to 9.2 % from 8.9 % in April 2009.
Trading in the US index futures indicated Dow could rise 19 points at the opening bell today 5 June 2009.

India's largest software services exporter by sales TCS rose 1.93%.
Cement stocks rose on posting healthy growth in shipments in the month of May 2009. India Cements, Grasim Industries, ACC, Ambuja Cements rose by between 0.68% to 6.06%.
Some capital goods stocks rose on hopes the UPA government's aim to revive economic growth would spur orders. Larsen & Toubro, Bharat Heavy Electricals, Crompton Greaves, Siemens, Thermax, Praj Industries rose by between 0.78% to 5.3%.
Auto stocks rose on posting good monthly sales figures in the month of May 2009. Tata Motors, Mahindra & Mahindra, Bajaj Auto, Maruti Suzuki India and Hero Honda Motors rose by between 0.73% to 5.64%.
Healthcare stocks rose on hopes newly elected UPA government will give primary importance to healthcare segment and health of citizens. Ranbaxy Laboratories, Dr Reddy's Laboratories, Biocon, Wochardt, Pfizer rose by between 0.41% to 6.22%.
Telecom stocks rose on hopes government may speed up the auction process for the spectrum allocation of third generation WiMax services and stress on rural telephony. Idea Cellular and Bharti Airtel rose by between 1.56% to 1.59%. Reliance Communications fell 0.98%.
Metal stocks as Copper rose in London, heading for a third straight weekly gain, on speculation that the pace of job cuts slowed in the U.S., adding to indications that the worst of the economic slump may be past. Steel Authority of India, National Aluminum Company, Hindalco Industries and Sterlite Industries rose by between 0.77% to 3.39%.
Hindustan Zinc rose 0.05% on raising zinc and lead prices.
Sugar stocks rose on hopes of a firm sugar prices on fall in output. Dhampur Sugar, Shree Renuka Sugars and Bajaj Hindustan rose by between 2.74% to 8.92%.
Shares of multiplex cinema operators rose on reports talks between Bollywood producers and multiplex owners came to an end as the two parties reached a revenue sharing deal. Cinemax India, Adlabs Films, PVR, Inox Leisure, Pyramid Saimira, and Fame India rose by between 0.95% to 5%.
Cals Refineries clocked the highest volume of 8.61 crore shares on BSE. Jaiprakash Associates (3.2 crore shares), Unitech (3.05 crore shares), Satyam computer Services (2.65 crore shares) and Ispat Industries (2.26 crore shares) were the other volume toppers in that order.
Jaiprkash Hydro Power clocked the highest turnover of Rs 308.19 crore on BSE. Unitech (Rs 298.34 crore), Suzlon Energy (Rs 292.50 crore), Reliance Capital (Rs 274.32 crore) and Reliance Industries (Rs 217.99 crore) were the other turnover toppers in that order.
Sensex settles above 15,000 level; at nine-month

( 5 th June 2009 /Economic Times & other leading News channels)