Nifty gains for second consecutive session; closes above 6700 level

The fifty stock index -- Nifty -- ended a range bound session in the positive terrain for second consecutive session as blue-chips such as Reliance Industries, ITC and ICICI Bank gained after foreign investors snapped a five-day selling streak in index futures. The sentiments were on optimistic note from early trade after C Rangarajan, Chairman, Prime Minister’s Economic Advisory Council (PMEAC) stated that with gold imports slowing down and inflation levels showing signs of decline, the country’s current account deficit (CAD) is expected to be around 2% of the GDP in the coming few years.  However, the HSBC Services Purchasing Managers' Index compiled by Markit, rose to 48.5 in April from 47.5 in March, but held stubbornly below the 50-mark that divides growth from contraction. Traders were seen piling up positions in Consumer Durables, Oil & Gas and Capital Goods stocks, while selling was witnessed in IT, Teck and Power sector stocks.

It seemed that some traders were winding up their positions in nifty index option as they expected rang bond session till the May 12, 2014. However, one may also point out that this consolidation phase may just be the lull before the storm. The benchmark indices have been in consolidation mode, the jump in VIX to 33 levels and the large open interest activity in strike prices ranging from Nifty 6000 puts to Nifty 8000 calls suggest that the markets are bracing themselves for volatility ahead of and in the aftermath of the election results on May 16, 2014.

In the index option segment, maximum OI continues to be seen in the 7000-6800 calls and 6500-6400 puts indicating this is the trading range expectation. In today's session, the 6900, 7100 and 7200 Call strikes saw addition of 2.21, 3.10 and 4.54 lakh shares, respectively. On the other hand, 6700, 6500 and 6300 Put strikes saw addition of 1.35, 2.53 and 3.59 lakh shares, respectively. The top gainers from the F&O Securities were Just Dial, Titan Company and Adani Ports. The top losers were Canara Bank, Exide Industries and Power Grid. Among the top gainers, Titan Company futures ended the trade up by 5.82 % after reporting 11.6% increase in net profit at Rs 206.44 crore for the fourth quarter ended March 31, 2014. While Among the top losers, Canara Bank ended the trade with a cut of 6% after reporting a 15.7% decline in net profit to Rs 611 crore for the quarter ended March 31, 2014.

Most of the sectoral indices on the NSE were settled in the green, CNX Energy up by 0.68%, Bank Nifty up by 0.66%, CNX FMCG up by 0.41%, CNX Finance up by 0.32%, CNX Auto up by 0.25%, CNX Metal up by 0.22% and CNX Pharma up by 0.11% while CNX Media down by 0.60%, CNX IT down by 0.48%, CNX PSU Bank down by 0.21% and CNX Realty down by 0.14% were the losers on the NSE sectoral indices.

The India Volatility Index (VIX), a gauge for market's short term expectation of volatility decreased by 2.69% and reached 33.27. The 50-share CNX Nifty increased by 15.95 points or 0.24% to settle at 6,715.30.

Nifty May 2014 futures closed at 6,746.70 on Tuesday at a premium of 31.40 points over spot closing of 6,715.30, while Nifty June 2014 futures ended at 6,766.05 at a premium of 50.75 points over spot closing. Nifty May futures saw contraction of 0.24 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, Reliance Industries May 2014 futures were at a discount of 6.45 points at 958.70 compared with spot closing of 965.15. The number of contracts traded was 15,220.

Canara Bank May 2014 futures traded at a premium of 2.80 points at 289.30 compared with spot closing of 286.50. The number of contracts traded was 15,945.

ICICI Bank May 2014 futures were at a premium of 4.95 points at 1283.80 compared with spot closing of 1278.85. The number of contracts traded was 17,852.

United Spirits May 2014 futures traded at a premium of 15.75 points at 2791.95 compared with spot closing of 2776.20. The number of contracts traded was 10,326.

Century Textiles May 2014 futures traded at a premium of 2.10 points at 387.50 compared with spot closing of 385.40. The number of contracts traded was 10,852.Among Nifty calls, 7000 SP from the May month expiry was the most active call with contraction of 0.23 million open interest.Among Nifty puts, 6500 SP from the May month expiry was the most active put with addition of 0.23 million open interest.The maximum OI outstanding for Calls was at 7,000 SP (3.84 mn) and that for Puts was at 6,500 SP (4.33 mn).

The respective Support and Resistance levels of Nifty are: Resistance 6738.53--- Pivot Point 6720.22 --- Support --- 6696.98.

The Nifty Put Call Ratio (PCR) finally stood at 1.12 for May month contract. The top five scrips with highest PCR on OI were GAIL 1.46, UPL 1.26, Ultra Cement Co 1.12, JSW Steel 1.04, and Tech Mahindra 1.04.

Among most active underlying, United Spirits witnessed contraction of 0.08 million  of Open Interest in the May month futures contract, followed by HDFC Bank witnessing  an addition of 0.47 million of Open Interest in the May  month contract; while Reliance Industries witnessed  contraction of 0.25 million of Open Interest in the May month futures contract, State Bank of India witnessed  contraction of 0.04 million of Open Interest in the May month contract and finally, Aurobindo Pharma witnessed  an addition  of 0.13 million  of Open Interest in the May month's future contract.