Nifty slips lower for second day in a row; ends below 7350 level

Indian 50-share index, Nifty, extended its southward journey amid choppy session and ended the day’s trade below its crucial 7,350 mark ahead of the derivatives expiry later this week. The benchmark started in the red as investors turned cautious and booked profits with oil and gas and financial shares leading the decline. Sentiments weakened further as investors indulged in squaring off their positions created during the recent rally anticipating increase in volatility in the expiry week, which will see off, May derivatives contracts on May 29, 2014. However, the index pared some of their losses in the afternoon session as buying appeared in defensive sector stocks such as IT, Tech and healthcare, but weak opening in European counterparts extended nervousness in the market and the index once again fell towards its intraday day low level. Thereafter, the indices kept oscillating in a narrow range throughout the day. Finally, Nifty ended the session below its crucial 7,350 mark with a cut of over half a percent.

The market is likely to remain volatile this week as traders roll over positions in the futures & options (F&O) segment from the near month May 2014 series to June 2014 series. The near month May 2014 derivatives contract expire on Thursday. In the index option segment, maximum OI continues to be seen in the 7400-7500 calls and 7000-7100 puts indicating this as the expected trading range. In today's session, some traders exited from 7500 and 7400 Puts on the back of profit booking. Moreover, some strategists have been creating long strangles in Nifty, buying calls at 7300 and 7400 levels and buying puts at 7300 and 7200 levels as they expecting high volatility in last week of F&O expiry.

Most of the sectoral indices on the NSE were settled in the red, CNX PSU Bank declined by 2.42%, CNX Energy down by 1.80%, CNX Realty down by 1.20%, CNX Auto down by 1.02%, CNX Finance down by 0.99%, Bank Nifty down by 0.61% and CNX FMCG down by 0.13%, while CNX IT up by 0.45%, CNX Media up by 0.36%, CNX Metal up by 0.19% and CNX Pharma up by 0.08% remained the gainers in the trade.

The India Volatility Index (VIX), a gauge for market's short term expectation of volatility decreased by 3.73% and reached 19.10. The 50-share CNX Nifty decreased by 41.05 points or 0.56% to settle at 7,318.00. Nifty May 2014 futures closed at 7320.10 on Tuesday at a premium of 2.10 points over spot closing of 7,318.00, while Nifty June 2014 futures ended at 7338.75 at a premium of 20.75 po ints over spot closing. Nifty May futures saw contraction of 2.51 million (mn) units, taking the total outstanding open interest (OI) to 16.63 mn units. The near month May 2014 derivatives contract will expire on May 29, 2014.

From the most active contracts, HDFC Bank May 2014 futures were at a premium of 1.85 points at 806.65 compared with spot closing of 804.80. The number of contracts traded was 35,140.

DLF May 2014 futures traded at a premium of 0.60 points at 205.20 compared with spot closing of 204.60. The number of contracts traded was 24,173.

ICICI Bank May 2014 futures were at a premium of 7.75 points at 1452.10 compared with spot closing of 1444.35. The number of contracts traded was 31,746.

Reliance Industries May 2014 futures traded at a premium of 4.55 points at 1090.60 compared with spot closing of 1086.05. The number of contracts traded was 28,976.

Aurobindo Pharma May 2014 futures traded at a premium of 1.70 points at 642.70 compared with spot closing of 641.00. The number of contracts traded was 25,097.

Among Nifty calls, 7,500 SP from the May month expiry was the most active call with an addition of 0.36 million open interest. Among Nifty puts, 7,000 SP from the May month expiry was the most active put with an addition of 0.16 million open interest. The maximum OI outstanding for Calls was at 7,500 SP (6.76 mn) and that for Puts was at 7,000 SP (4.75 mn). The respective Support and Resistance levels of Nifty are: Resistance 7369.05 --- Pivot Point 7321.9--- Support --- 7270.85.

The Nifty Put Call Ratio (PCR) finally stood at 0.87 for May month contract. The top five scrips with highest PCR on OI were SSLT 1.37, PNB 1.33, UPL 1.31, Siemens 1.25 and Axis Bank 1.19. Among most active underlying, SBI witnessed contraction  of 0.34 million of Open Interest in the May month futures contract, followed by Reliance Industries witnessing  contraction  of 2.62 million of Open Interest in the May  month contract; while HDFC Bank witnessed  contraction of 8.94 million of Open Interest in the May month futures contract, United Spirits of India witnessed  contraction 0.57 million of Open Interest in the May month contract and ICICI Bank witnessed  contraction  of 1.42 million  of Open Interest in the May month's future contract.