U.S. equities are about 40 percent above their fair value

Domestic News:

U.S. equities are about 40 percent above their fair value and headed for a decline as central banks pull back on quantitative easing that has pushed up asset prices, according to economist Andrew Smithers. Asian stocks gained after Toyota Industries Corp. reported unexpected profit and South Korea’s economy grew at the fastest pace in seven years, boosting the prospects for company earnings. Excise collections dropped 17 per cent in September to Rs.8, 180 cr from the same period the previous year despite the clear evidence of a pick-up in manufacturing.

Corporate news:

Air India is seeking an additional equity of Rs.5,000 cr from the government as it promises to squeeze its fleet size and reduce the wage bill of its 31,000 strong work force. R.Com said that it did not have to pay any additional license or spectrum fee to the government nor had it inflated its revenues. Petroleum Ministry is considering a proposal to allow GAIL to levy a marketing margin of about 6.16 cents for a mbtu on gas sold at government controlled price.

Derivative View:

Nifty: (4997): The index opened on a positive note but was unable to hold onto the gains. It ended the day with gain of 8 points. The index encountered stiff resistance around the 10 dma = 5067 and 20 dma = 5039, intraday rise saw stiff resistance around averages and it closed below the 10 and 20 dma level. Sustaining below the 10 and 20 dma should be considered negative in the near term. On the downside index has support around 4960, lower support is around 4920. Nifty Oct contract ends the Week down by 117.15 points at a premium of 10.85 points in Oct contracts adding OI by 0.4% across all active Nifty contracts. Nifty Open Int PCR at 1.289 compared to 1.500 last week on back of paring of 19.10 Lakh in Nifty puts and addition of 55.98 Lakh call options.
Nifty VIX at 24.49 from 26.28 the previous Week. Highest OI in Nifty put at 4900 Oct strike and calls is at 5100 Oct strike. Long build up was seen in POLARIS, BAJAJHIND, DABUR, YESBANK & HINDZINC over the week. Short build up was seen in CROMPGREAV, DIVISLAB, PUNJLLOYD, BHEL, GMRINFRA, GRASIM, BHARATFORG, PTC, IDEA, RELIANCE, SESAGOA, JPHYDRO, GTLINFRA, LITL, KSOILS, JSWSTEEL, RELINFRA, CHAMBLFERT, MRPL, PETRONET, ULTRACEMCO, TATASTEEL, HCC, ONGC, NAGARCONST, UNITECH, RELCAPITAL, DISHTV, CENTURYTEX & NAGARFERT over the week. Market wide rolls seen at 21.60% compared to 23.30% in last expiry and 3 month average of 21.20. Nifty rollover seen at 25.17% compared to 20.04% in last expiry and 3 month average of 25.72. Nifty rolls over % higher no of contracts compared to last expiry.

Views and Outlook:

Nifty OI PCR sees a falling trend as Nifty current month puts was paring OI during the week. Lower strike puts was also seen paring OI and significant paring was seen in 4800, 4900, 5100 and 5000 Oct strikes puts with indications of negative bias and support levels moving down. The expiry week is expected to open lower and rollover led volatility can rise during the week. Supports in Nifty near contracts seen at 4920 levels and resistances 5080 levels during the start of the week.