Nifty declines for third consecutive session; closes below 6750 level

After trading in tight range for most part of the session, Nifty witnessed recovery in afternoon session. However that was soon reciprocated by profit-booking which dragged the index to its lowest point by close of trade. Nifty by end of trade, shed over half a percent and settled below the crucial 6750 level. A record-setting rally, driven by hopes of a revival in domestic economy and that the BJP led by Narendra Modi will form the next government, is now chipping off as investors chose to book profit amid the January-March earnings season. Sentiment remained cautious as investors weighed developments in Ukraine and ahead of the Federal Open Market Committee (FOMC) meeting which will begin late Tuesday. Shares of metal companies, banks and auto makers led losses.

On call option front highest open interest was positioned at 7000 mark which will act as resistance in upside, while aggressive built up were seen at 6800 & 7300 level which accumulated 3 lakh and 2 lakh amount in open interest. On put option front highest open interest was positioned at 6500 mark which is strong support at any sharp correction and 6700 was immediate support, while positions were built up at 6800 mark which accumulated 1.48 lakh amounts in open interest. In the Bank Nifty option segment, maximum OI to be seen in the 13000-13500 calls and 12500-12000 puts indicating this is the trading range expectation.

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 slowdown buying options contracts. The top gainers from the F&O segment were Jain Irrigation Systems, Petronet LNG and IRB Infrastructure Developers. The top losers were Jindal Steel, Tata Steel and Hindustan Unilever.

All the sectoral indices on the NSE settled in the negative territory with CNX Metal down by 2.76%, CNX PSU Bank down by 1.76%, CNX Media down by 1.45%, Bank Nifty down by 1.31%, CNX Auto down by 1.07%, CNX Finance down by 0.91%, CNX FMCG down by 0.86%, CNX Realty down by 0.76%, CNX Energy down by 0.44%, CNX Pharma down by 0.19% and CNX IT down by 0.10%.

The India Volatility Index (VIX), a gauge for market's short term expectation of volatility increased by 1.06% and reached 31.0500. The 50-share CNX Nifty plunged by 46.00 points or 0.68% to settle at 6,715.25.Nifty May 2014 futures closed at 6,760.30 on Tuesday at a premium of 45.05 points over spot closing of 6,715.25, while Nifty June 2014 futures ended at 6,779.95 at a premium of 64.70 points over spot closing. Nifty May futures saw contraction of 0.86 million (mn) units, taking the total outstanding open interest (OI) to 12.90 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 1.75 points at 154.95 compared with spot closing of 153.20. The number of contracts traded was 14,178.

Reliance Capital May 2014 futures traded at a premium of 4.85 points at 375.70 compared with spot closing of 370.85. The number of contracts traded was 16,304.

Tata Steel May 2014 futures traded at a premium of 2.80 points at 407.80 compared with spot closing of 405.00. The number of contracts traded was 19,174.

Reliance Industries May 2014 futures were at a premium of 2.45 points at 942.95 compared with spot closing of 940.50. The number of contracts traded was 14,747.

Adani Enterprises May 2014 futures were at a premium of 4.40 points at 437.40 compared with spot closing of 433.00. The number of contracts traded was 16,878.

Among Nifty calls, 7,000 SP from the May month expiry was the most active call with addition of 0.32 million open interest.

Among Nifty puts, 6500 SP from the May month expiry was the most active put with addition of 0.16 million open interest.

The maximum OI outstanding for Calls was at 7,000 SP (3.59 mn) and that for Puts was at 6,500 SP (3.11 mn).

The respective Support and Resistance levels of Nifty are: Resistance 6760.42 --- Pivot Point 6734.53 --- Support --- 6689.37.

The Nifty Put Call Ratio (PCR) finally stood at 0.99 for May month contract. The top five scrips with highest PCR on OI were UPL 1.39, REC 1.36, Ultra Cement 1.33, Hero Moto 0.97, and Maruti 1.90.

Among most active underlying, United Spirits witnessed  an addition  of 0.03 million of Open Interest in the May month futures contract, followed by HDFC Bank witnessing addition of 0.31 million of Open Interest in the May  month contract; Reliance Industries witnessed an addition of 0.28 million of Open Interest in the May month futures contract. SBI witnessed an addition of 0.12 million of Open Interest in the May month contract and Auro Pharma witnessed an addition of 0.35 million of Open Interest in the May month's future contract.