Sanat Vallikappen

Mumbai: Analysts who ended up eating crow for giving out ‘buy’ calls in January instead of ‘sell’, and investors, may have an avenue to regain credibility if certain clues from the derivatives market are anything to go by.

And these clues, made possible by the longer tenure options contracts introduced by the Securities and Exchange Board of India in March this year, have started indicating a positive bias going into September-December 2008.

“It might just be time to start saying ‘accumulate’, rather than ‘sell’,” said Vijay Bhambhwani, chief executive officer of BSPLindia.com.

Deepak Jasani, head of retail research at HDFC Securities, said over the last one month, there has been an active build-up in these longer tenure options contracts, which seems to be by foreign institutional investors.

Data reveal that open interest in Nifty call options with a higher tenure than three months has been increasing all through April 2008, touching Rs 113 crore now, four times more than the sub-Rs 25 crore level in March.

Call options give the buyer of the option the right, but not the obligation to buy a share (in this case the Nifty) at a pre-determined date (expiry) and price (strike).

With strikes of 5,600 available for Nifty call options that expire as early as September and December 2008, the inference could be that 5,600 on the Nifty may be possible by then.

Though put options (which give the buyer of the put the right but not the obligation to sell a share at a predetermined date and price) at 5,600 have also been built up, the calls far outnumber the puts, indicating a stronger upward bias.

It was in early March that the Securities and Exchange Board of India allowed option contracts with a tenure of six, nine and twelve months, and half-yearly options up to 3 years, to complement the existing basket of one-, two- and three-month contracts.

Source : DNA