Rejuvenated Nifty surges a day before RBI policy meet; ends above 7,350 mark

After witnessing some drubbing in the previous two sessions, Nifty, the 50-share index, heaved a sigh of relief, settling with good gains as sentiment turned bullish ahead of the Reserve Bank of India's policy meet tomorrow. Although the central bank is likely to keep rates steady, speculators expect other forms of easing that would help spur growth. Some support also came in from reports that foreign institutional investors (FIIs) bought shares worth a net Rs 2,977.62 crore on May 30, 2014. Overlooking subdued GDP data announced after trading hours on Friday, the index made a positive start in early morning deals on account of firm global cues. Asian markets were mostly trading higher after a gauge of China's manufacturing expanded at the fastest pace in five months, too had a positive impact. Traders were seen piling up positions in Capital Goods, PSU and Bankex stocks, while selling was witnessed in Healthcare and FMCG sector stocks.

On the first trading day of June, Nifty futures saw good recovery and ended its trade above 7350 level. Looking at the option data for June series maximum call OI is seen at 7500 followed by 7400 strike prices whereas maximum put OI is at 6800 & 7000 strike prices suggesting broader range is likely in between 7000-7500 levels. Nifty will be in this range till Union budget presented by the new government in July. In the stock options segment, many traders and hedgers have added position in State Bank of India ahead of RBI's bi-monthly monetary policy review on Tuesday. Many traders added positions in 2740 and 2800 calls on hopes of further rally in SBI. However, some hedgers have also built their potion in 2640 and 2500 puts.

The top gainers from the F&O Securities were Syndicate Bank, Reliance Capital and Indian Overseas Bank. The top losers were Aurobindo Pharma, Just Dial and Dabur India. Snapping four consecutive sessions’ losing streak, India VIX - the gauge of underlying volatility in the market - has risen in today's session as traders turned cautious ahead of the RBI's policy meet tomorrow.

The India Volatility Index (VIX), a gauge for market's short term expectation of volatility increased by 0.90% and reached 16.49. The 50-share CNX Nifty increased by 132.55 points or 1.83% to settle at 7,362.50. Nifty June 2014 futures closed at 7370.95 on Monday at a premium of 8.45 points over spot closing of 7,362.50, while Nifty July 2014 futures ended at 7406.90 at a premium of 44.40 points over spot closing. Nifty June futures saw contraction of 0.18 million (mn) units, taking the total outstanding open interest (OI) to 16.50 mn units. The near month June 2014 derivatives contract will expire on June 26, 2014.

From the most active contracts, HDFC Bank June 2014 futures were at a premium of 3.45 points at 821.95 compared with spot closing of 818.50. The number of contracts traded was 21,589.

Reliance Industries June 2014 futures were at a premium of 5.80 points at 1088.70 compared with spot closing of 1082.90. The number of contracts traded was 17,335.

Tata Steel June 2014 futures traded at a premium of 1.90 points at 496.60 compared with spot closing of 494.70. The number of contracts traded was 21,904.

ICICI Bank June 2014 futures were at a discount of 11.75 points at 1448.05 compared with spot closing of 1459.80. The number of contracts traded was 26,461.

Aurobindo Pharma June 2014 futures traded at a premium of 2.30 points at 641.30 compared with spot closing of 639.00. The number of contracts traded was 15,709.  Among Nifty calls, 7400 SP from the June month expiry was the most active call with an addition of 0.55 million open interest. Among Nifty puts, 7200 SP from the June month expiry was the most active put with  an addition of 0.66 million open interest.

The maximum OI outstanding for Calls was at 7,500 SP (49.20 mn) and that for Puts was at 7000 SP (41.14 mn).  The respective Support and Resistance levels of Nifty are: Resistance 7407.57 --- Pivot Point 7323.53 --- Support --- 7278.47.

The Nifty Put Call Ratio (PCR) finally stood at 0.79 for June month contract. The top five scrips with highest PCR on OI were Axis Bank 1.11, Bharat Forg 0.95, Havells 0.93, Maruti Suzuki 0.83 and M&M 0.81.

Among most active underlying, HDFC Bank witnessed contraction of 0.05 million of Open Interest in the June month futures contract, followed by Larsen & Toubro witnessing an addition  of 0.11 million of Open Interest in the June  month contract, Reliance Capital  witnessed an addition of 0.77 million of Open Interest in the June month futures contract, Tata Steel witnessed  an addition 18.63 million of Open Interest in the June month contract and ICICI Bank witnessed  an addition of 0.24 million  of Open Interest in the June month's future contract.