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Sanjiv Shankaran

UPBEAT sentiments that stemmed from positive developments in the Government exercise to divest its stake in state-owned companies pushed up equities towards the end of the preceding week. Following a marked surge in the last trading session, the BSE Sensitive Index closed at 3,306 points, higher by about 2.3 per cent in relation to the closing value of the week ended November 30, 2002.

Positive sentiments more than offset selling by foreign institutional investors (FIIs). But FIIs may still hold the key to the duration of the current firm trend in equities. For instance, if FIIs continue to press significant sales in the coming week, there may be a trend reversal because of their large stakes in bellwether stocks.

In keeping with the primary reason for the late-week rally, state-owned oil companies, Hindustan Petroleum and Bharat Petroleum, registered large gains. Among the stocks that are permitted in the derivatives trading category, Hindustan Petroleum, witnessed noteworthy price movement. In contrast, there was limited movement in the case of technology stocks such as Infosys and Satyam Computers. The trend in the spot market showed up in the derivatives market with call option contracts in Hindustan Petroleum proving lucrative for the holders.

Options: December contracts dominated trading in both options and futures. Usually, contracts that expire the earliest are the most heavily traded. In call option contracts last week, December contracts of Satyam, Reliance and Hindustan Petroleum proved most popular among participants.

Satyam's December call option contract at a strike price of 280 was the most actively traded contract last week. A volume of about 6,088 contracts was generated last week, and the contract ended the week in-the-money.

Another Satyam December call option; at a strike of 300 was heavily traded. The contract that ended the week out-of-the-money notched a volume of 5,883 contracts.

Hindustan Petroleum's call option contracts registered substantial trading interest on the heels of stock galloping ahead in the spot market. With the Government's disinvestment programme subject to the contradicting pulls of a coalition Government, derivative contracts in Hindustan Petroleum seem to hold rich potential. Hindustan Petroleum's December call option contract at a strike price of 240 registered a volume of 3,652 contracts and ended the week in-the-money. Another Hindustan Petroleum December call option contract, this one at a strike of 230, ended the week in-the-money.

Put option contracts that topped the volume list did not leave option holders with gains. Satyam's December contract at a strike of 280 ended the week out-of-the-money. Another frequently traded December put contract, Hindustan Petroleum at a strike price of 220, also ended the week out of the money.

Futures: Trading activity in futures contracts that expire in December increased this week. A look at the pattern of trading showed there was one noteworthy change; a wholly predictable one though. Hindustan Petroleum's December contracts picked up steam, and ended the week with an aggregate volume of 25,761 contracts.

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