Bulls ‘short’ on Sesa Goa as they see limited upside: Is it True?

 I was reading this news article on friday morning which came in www.economictimes.com 

http://economictimes.indiatimes.com/articleshow/5983459.cms 

since thursday is expiry day one can expect there will be some amount of volatilty in stocks..but what made me intresting to spend some time on this is i like sesa goa very much coz there is lot of volatility in this stock...when ever there is ba of news of economy going slow or demand from china is reduced this stock will tank and when good news comes in the form of economy growing ,more demand from china or any other news..this will rise rapidly. These economic times very reporting that

Shares of Sesa Goa rose sharply on Thursday on the back of short-covering, but traders used this pullback to build short positions on the stock, as they feel the upside is capped

See the options data on sesa Goa on Thursday one can clearly see that 320 put has huge open interest that clearly indicates the down side is limited and the article on Thursday says upside is limited Thursday it ended at 337 . Since there is huge built up on 320 put it means the support is at 320 and not the resistance 

 Now see this data on Friday 320 Put as has almost same OI and other out of the money PUT are also started to rise . Guess what happened on Friday ..Sesa Goa had highest amount of % increase in List A Stocks ..10% rise in a single session...link to check for sesa-goa price on friday

  now do u call this as Upside Limit ? Still unable to believe economic times reporting like that. I have a feeling that i might be a paid news from brokerages .

Chance of India Defaulting?

Everyone is talking about Greece default and Euro region problems..including naive like myself. But why there is less noise on India defaulting. One reason might be  India is pretty much safe ,thanx to RBI for restricting  FII to hold India's debt. Greece holds much of its debt in form of External Debt ,mean foreign banks used to fund its balance sheet and as its time to repay them back and unfortunately they don't have the resources to pay back..alternatives for Greece are going default..or restructure the debt and let the future generation face the sufferings.I guess the chance of happening later is more 

Now coming to India, we also have debt ,but majority in the form  internal debt. Government borrows money from market by issuing securities called G-secs (long term) T-bill (short term) and it will pay the lender at specified interest rate until the securities mature after which  it has to repay the money back.

RBI will do these kind of transactions,apart from this RBI also has tools like MSS to increase the liquidity in market by buying back the government bonds and decrease the liquidity by selling the bonds.Generally RBI has calendar in which it gives dates on selling government securities
Here is the link for this year RBI Calendar

So Where are we Standing on G-sec till now..how many outstanding securities does Indian government hold.
How much interest are we paying out?Here is picture which gives some understanding on Gsecs size and Maturity .Y Axis shows Gsecs amount in Crores and X-Axis shows Maturity Date

 The Larger the Bubble means the higher the security value which government borrowed and it needs to repay that amount at maturity . We see in 2010 and 2011 we have small bubbles mean government has to repay less  amount this year, They can do this by using new dated securities or selling government stock,increase taxes etc ..Problem is if they issue new securities say 2040 bond, then they have to pay the interest till then which is a burden and if they go for selling there stake in PSU's then they will miss out the dividend  and also face political pressure. Am not still not sure of which way to support coz issuing a new bond is like a ponzhi scheme and selling a stock is like killing golden goose

Till now we havent faced the real problem coz its a small repayment in 2010 an  2011, it expected good chunk from 3G revenue and sale of Govt Stock. But the real problems for govt starts when they to repay the amount in 2013,2014,2015. Larger bubbles start from then and real interest burden will start .And if they issue new securities to cover up them then interest burden will increase .See the below graph on Interest payment by government (budget estimates)

 See the rate at which Government is paying the interest ,there is a sudden spike around 2007-08 and 2008-09 which might  be attributed to government issuing more bonds for more spending on farmers loan waiver and pay commission.Slope got a bit horizontal for 2010-11 because government planned to issue less number of bonds and expected more revenue in from 3G and sale of stock..But 3G cannot happen always right,..so from where does the government gets revenue to fund the balance sheet apart from issuing new secs and increase the interest burden and if this burden continuous in coming years ..then i believe there will some be some turmoil in future ..hehe. :) It has another option...Printing Money, but where will it lead? Will cover up later..

Game Started

Am wondering at myself for writing to this . Guess ? FIFA World Cup ..nopes Games are yet to start..have to wait for another 23 Days. So something made me to write this.right?.Yes, we do see Games Daily in our life and  Games are played between Two players who take decision or combination of decisions for a particular outcome ,but the fate of player is not only dependent on his decisions but also on other players,but most of them seem to be important to us .

But off late am finding few games to be interesting ,one such is the game played between Player A consisting of traders ,investors,speculators,bankers,officials of(on) EURO Region and Player B of the same pool of (on) Non-Euro region in Order
Player A thinks Player B is playing with there market and making its currency and market to go down ,yields on bonds up etc..And Player B thinks Player A is in Bad shape and it will default and pulls out all his money from there market.Since Player B is pulling out his money from there market ,Player A also starts pulling out his money from the market there by making the market to go down south in first few days of this month

Another Set is by Officials who think that players are taking away money afraid of countries going default in turn making with Euro hot , Here comes the Officials who in-turn want to cool the temperature by infusing 
1 Trillion Package,Central Bank buying the bonds, and giving cushion to euro by arranging swap with dollars.

Again the Player B feels conditions are improved,confidence is back then he  brings back the money into market expecting that Player A's Debt problem is solved  in-turn Player A also brings money into market cause player B has brought  money into market after the debt problem is solved for now

Here if both the players think they are Safe than they make the market to go up like anything and both can win,We have 3 possibilities
1) Both Winning
but once a player gets suspicion or not confident then we will have 2 other possibilities
1 ) One player might win other will loose
2) Both might loose if no one has confidence on each other

For now Officials brought peace into market ,but there are always people looking in  microscope to identify the defects .Once this confidence is gone..we might see another leg of turmoil in near future

Apart from this am playing another game whose pay off is not in favor of me right now ..hehe :)

Volatility Ahead with High OI and Volumes

 While i was looking at Open Interest in options  on NIFTY was bit surprised by seeing the volume of futures increased in last few days ,average volume in April is around 5 Lakh contracts and now we are trading above that..will see how it goes till month..as Volatility index came of from lows..we might expect more volumes in coming days.

Date	Index Futures
	No. of contracts	Turnover (Rs. cr.)
03-May-10	349631	8451.55
04-May-10	570849	13736.02
05-May-10	714820	16977.22
06-May-10	784241	18544.8
07-May-10	880349	20520.97
10-May-10	745870	17846.47
11-May-10	651926	15681.6

Todays NIFTY Futures contract details, we had a Price rise with increase in Open Interest in market with good volumes when compared to average of last month,,

CONTRACTS	VAL_INLAKH	OPEN_INT	CHG_IN_OI
581001	1492615.74	27492350	713300

Looks like its enough to judge the direction still i will do some more research and will come up with another post some time later

Here is how we interpret Open Interest with Volumes and Price Rise

Price	Volume	Open Interest	Interpretation
Rising	Rising	Rising	Market is Strong
Rising	Falling	Falling	Market is Weakening
Falling	Rising	Rising	Market is Weak
Falling	Falling	Falling	Market is Strengthening

for me it looks markets are Strong for now..Lets compare them with Options Data

From the Graph we can that 5000 and 5100 put had a increase in OI..means Options Writers are writing the puts in expectation that market might go up.. that indicates for short term we are having support at those prices and also one can see that there is a  decrease in OI for 5300 Call ,mean option writers closed there positions in expectation of market going upwards..for now we have resistance at 5300


Even though global cues are weak we will where it heads in coming days..my bet is towards going up :) will see

Buying and Selling of FII vs DII

Here we can what exactly happened during this week with respect to purchase and selling of FII and DII.
I didnt capture the swing in index price,just placed closing price for the day for now..but its enough to make a few inferences about NIFTY.

Nifty was around 5250 at start of month then greece problems were taken seriously by markets around the world and started to slide we see that Domestic Institutional Investors were net buyers on  5th and 6th and 7th and FII were selling inturn pulling the market down and making good returns. Again on Mondy they were the net buyers and made the market to go up...it looks like FII's are buying at low price and selling at high price and DII's are buying at high price and selling at low price ..so we expect FII to sell around 5250 and DII;s buying at the levels...will see in coming days :)