Nifty declines for third consecutive session; closes below 6700

After opening flat and trading within a small range in early trades, Nifty capitulated under pressure in the latter half of the session and dropped below the crucial 6700 mark on sustained selling arising out of profit booking and as traders weighed rising inflation numbers as signal that RBI may not cut rates in the following monetary policy. Although, Nifty started in the green, tracking firm Asian cues after better-than-expected first quarter growth from China, the market cracked in noon trades due to broad-based selling pressure. The sentiments were on a pessimistic note from early trades after retail inflation data disappointed the street by coming higher than expected at 8.31% in March. Some buying was seen in metal and mining stocks as China reported better than estimates data. Shares of public sector oil marketing companies viz. BPCL, HPCL and IOC edged lower, as the price of petrol was cut by Rs 0.70 a litre, excluding local levies.

In the index option segment, maximum OI continues to be seen in the 6700-6800 calls and 6600-6500 puts indicating this is the trading range expectation. However, many traders exited from 6900 and 6800 puts on the back of profit booking, while some traders have added their position in 6700, 6800 and 6900 calls on expectations of an up-move in index.

Meanwhile, strategists have been creating long strangles in Bank Nifty, buying calls at 12600 and 12700 levels and buying puts at 12500 and 12400 levels. In the stock option segment, many traders, and hedgers have exited positions from Infosys after it posted Q4 results.

Moreover, India VIX - the gauge of underlying volatility in the market - has lost its positive movement and ended in red, which indicates that traders have slowed down buying options contracts. The top gainers from the F&O segment were Just Dial, Adani Ports and Adani Enterprises. The top losers were India Cements, Jaiprakash Power and Jaiprakash Associates.

Most of the sectoral indices on the NSE were settled in the red, CNX FMCG remained the major gainer, up 0.70% followed by CNX Metal up 0.17% while CNX Realty down by 4.00% followed by CNX IT down 2.30% CNX Energy down by 0.97%, CNX Media down by 0.83%, CNX Auto down by 0.66%, CNX PSU Bank down by 0.65%, CNX Finance down by 0.58%, CNX Pharma down 0.30% and Bank Nifty down by 0.13%,  were the only losers on the NSE sectoral indices.

The India Volatility Index (VIX), a gauge for market’s short term expectation of volatility was down by 2.24% and reached 31.1600. The 50-share CNX Nifty declined by 57.80 points or 0.86% to settle at 6,675.30.

Nifty April 2014 futures closed at 6,697.30 on Wednesday at a premium of 22.00 points over spot closing of 6,675.30, while Nifty May 2014 futures ended at 6,745.10 at a premium of 69.80 points over spot closing. Nifty April futures saw an addition of 0.37 million (mn) units, taking the total outstanding open interest (OI) to 15.72 mn units. The near month April 2014 derivatives contract will expire on April 24, 2014.

From the most active contracts, DLF April 2014 futures were at a premium of 0.45 points at 158.50 compared with spot closing of 158.05. The number of contracts traded was 19,418.

Reliance Communications April 2014 futures were at a premium of 0.40 points at 130.00 compared with spot closing of 129.60. The number of contracts traded was 17,497.

Reliance Capital April 2014 futures traded at a discount of 0.15 points at 368.25 compared with spot closing of 368.40. The number of contracts traded was 19,040.

Adani Enterprises April 2014 futures traded at a premium of 2.60 points at 432.20 compared with spot closing of 429.60. The number of contracts traded was 30,517.

ICICI Bank April 2014 futures traded at a premium of 4.75 points at 1224.15 compared with spot closing of 1219.40. The number of contracts traded was 17,028.

Among Nifty calls, 6,700 SP from the April month expiry was the most active call with addition of 1.00 million open interest. Among Nifty puts, 6800 SP from the April month expiry was the most active put with addition of 0.78 million open interest.

The maximum OI outstanding for Calls was at 6,800 SP (5.30 mn) and that for Puts was at 6,600 SP (5.26 mn).

The respective Support and Resistance levels of Nifty are: Resistance 6727.58-- Pivot Point 6696.37- Support -- 6644.08.

The Nifty Put Call Ratio (PCR) finally stood at 1.11 for April month contract. The top five scrips with highest PCR on OI were Ambuja Cements 1.15, Century Textile 1.01, MRF 1.00, HDIL 0.94 and Cairn 0.93.

Among most active underlying, Adani Enterprises witnessed contraction of 0.11 million of Open Interest in the April month futures contract, followed by Infy witnessing addition of 0.36 million of Open Interest in the April month contract; TCS witnessed a contraction of 0.06 million of Open Interest in the April month futures contract. SBI witnessed a contraction of 0.08 million of Open Interest in the April month contract and MCDOWELL-N witnessed a contraction of 0.65 million of Open Interest in the expiring April month's future contract.