Profit booking in second half drags Nifty below 6,800 mark

After touching fresh all-time highs in the previous session, 50-share NSE Nifty made a muted start as sentiments remained down-beat after Indian Meteorological Department's (IMD) first monsoon forecast predicted mostly below-average rains in much of South Asia, including India. Absence of any positive triggers and relentless profit booking dragged nifty below its psychological 6,800 mark and with a cut of over one percent more than half percent. The weak trend in the Asian region and lower opening in Europe on rising tension between Russia and the US over Ukraine further influenced the trading sentiment. Traders were seen piling positions in Realty, Consumer Durables and HealthCare stocks while selling was witnessed in FMCG, Oil & Gas and Bankex sector stocks.

The April F&O series have seen lower-than-average rollovers in both Nifty futures as well as market-wide rolls. The rollovers in the Nifty at around 59% is lower than the three-month average of 65%, indicates most market constituents feel the risk of taking bullish or bearish bets is far too high ahead of the election outcome on May 16. Nifty options chain for the May F&O series suggests a range of 6800-7000. The put-call ratio based on OI indicates that momentum in the market is positive.

Moreover, India VIX - the gauge of underlying volatility in the market – has declined for third consecutive day as traders turned cautious ahead of the election outcome on May 16, 2014. Falling India VIX indicates that traders have slowed down buying options contracts.

Most of the sectoral indices on the NSE were settled in the red, CNX FMCG declined by 2.08%, CNX Energy down by 1.95%, Bank Nifty down by 0.67%, CNX Finance down by 0.35%, CNX Auto down by 0.30% and CNX Metal down by 0.06% remained the top loser in the trade, while CNX PSU Bank up by 1% followed by CNX Media up 0.78%, CNX Realty up by 0.53%, CNX Pharma up by 0.19% and  CNX IT up by 0.03% remained the top gainers in the trade.

The India Volatility Index (VIX), a gauge for market's short term expectation of volatility declined by 1.45% and reached 30.6800. The 50-share CNX Nifty plunged by 58.05 points or 0.85% to settle at 6,782.75.

Nifty May 2014 futures closed at 6,826.30 on Friday at a premium of 43.55 points over spot closing of 6,782.75, while Nifty June 2014 futures ended at 6,846.80 at a premium of 64.05 points over spot closing. Nifty May futures saw contraction of 0.68 million (mn) units, taking the total outstanding open interest (OI) to 13.40 mn units. The near month May 2014 derivatives contract will expire on May 29, 2014.

From the most active contracts, DLF May 2014 futures traded at a premium of 1.55 points at 155.20 compared with spot closing of 153.65. The number of contracts traded was 15,753.

Aurobindo Pharma May 2014 futures traded at a premium of 5.80 points at 585.65 compared with spot closing of 579.85. The number of contracts traded was 27,221.

Reliance Industries May 2014 futures traded at a premium of 2.75 points at 949.35 compared with spot closing of 946.60. The number of contracts traded was 15,648.

Tata Steel May 2014 futures were at a premium of 4.70 points at 430.70 compared with spot closing of 426.00. The number of contracts traded was 12,959.

Yes Bank May 2014 futures were at a discount of 3.00 points at 465.70 compared with spot closing of 468.70. The number of contracts traded was 26,695.

Among Nifty calls, 7,000 SP from the May month expiry was the most active call with addition of 0.35 million open interest. Among Nifty puts, 6800 SP from the May month expiry was the most active put with addition of 0.49 million open interest.

The maximum OI outstanding for Calls was at 7,000 SP (2.90 mn) and that for Puts was at 6,500 SP (2.62 mn).

The respective Support and Resistance levels of Nifty are: Resistance 6844.12 --- Pivot Point 6808.48 --- Support --- 6747.12.

The Nifty Put Call Ratio (PCR) finally stood at 1.06 for May month contract. The top five scrips with highest PCR on OI were UltraTech Cements 1.69, Hero Moto Corp 1.01, MCDOWELL-N 0.97, Maruti Suzuki 0.96 and Tech Mahindra 0.94.

Among most active underlying, ICICI Bank witnessed contraction of 0.32 million of Open Interest in the May month futures contract, followed by Axis Bank witnessing addition of 0.86 million of Open Interest in the May  month contract; Yes Bank witnessed an addition of 0.10 million of Open Interest in the May month futures contract. SBI witnessed an addition of 0.06 million of Open Interest in the May month contract and Aurp Pharma witnessed an addition of 0.77 million of Open Interest in the May month's future contract.