Nifty recoups all early morning losses; ends flat above 7650 level

After tumbling down almost a percent in the first hour of the session, domestic benchmark CNX Nifty made a remarkable recovery from the lower point of the day paring all of its losses to end the day’s trade with a marginal gain of about 2 points as buying appeared in defensive sector stocks such as heathcare, IT and Teck. Some comfort also came after Society of Indian Automobile Manufacturers (SIAM) reported that domestic passenger car sales grew by 3.08% to 1,48,577 units last month as compared with 1,44,132 units in May 2013. Strong inflows from foreign institutional investors (FIIs) and supportive cues from global equity markets also improved sentiments. Nifty opened on a cautious note and witnessed a drastic fall in the early morning session as traders booked profits, while there was some cautiousness ahead of the consumer price index (CPI) inflation data for May and the Index of Industrial Production (IIP) data for April due on June 12, 2014. Moreover, consistent demand for the US currency among local and foreign banks weighed on the rupee.

Today’s recovery showed that there is some more stem in the market and is likely to continue its yesterday’s rally in tomorrow’s session. However, one can also believe that Nifty has gained so much ground so quickly that the next correction could be quite deep. The next major trigger could be the Budget and the President's address outlined some possible focus areas where the new government could go. Looking at the index option data, the distribution of open interest (OI) across the June Nifty option chains makes a move of anywhere between 7,000 and 8,000 possible. The put open interest (OI) is heavily clustered between 7,000 and 7,600 while the call OI is heavily clustered between 7,600 and 8,000.

The top gainers from the F&O Securities were Dish TV India, Apollo Hospitals Enterprise and Aurobindo Pharma. The top losers were Indiabulls Real Estate, Mahindra & Mahindra Financial and Power Finance Corporation. Meanwhile, India VIX - the gauge of underlying volatility in the market - has declined in today's session as traders turned cautious ahead of retail inflation data for May and factory output for April on Thursday.

The India Volatility Index (VIX), a gauge for market's short term expectation of volatility decreased by 2.53% and reached 16.66. The 50-share CNX Nifty increased by 1.80 points or 0.02% to settle at 7,656.40.Nifty June 2014 futures closed at 7668.30 on Tuesday at a premium of 11.90 points over spot closing of 7,656.40, while Nifty July 2014 futures ended at 7702.20 at a premium of 45.80 points over spot closing. Nifty June futures saw an addition of 0.92 million (mn) units, taking the total outstanding open interest (OI) to 16.09 mn units. The near month June 2014 derivatives contract will expire on June 26, 2014.

From the most active contracts, JP Associates June 2014 futures were at a premium of 0.85 points at 88.75 compared with spot closing of 87.90. The number of contracts traded was 20,226.

Reliance Communications June 2014 futures were at a premium of 0.40 points at 154.85 compared with spot closing of 154.45. The number of contracts traded was 22,923.

Bharti Airtel June 2014 futures were at a premium of 2.05 points at 363.45 compared with spot closing of 361.40. The number of contracts traded was 19,133.

Reliance Industries June 2014 futures traded at a premium of 2.50 points at 1120.70 compared with spot closing of 1118.20. The number of contracts traded was 24,791.

Coal India June 2014 futures traded at a premium of 1.05 points at 421.05 compared with spot closing of 420.00. The number of contracts traded was 20,322.Among Nifty calls, 7,700 SP from the June month expiry was the most active call with contraction of 0.02 million open interest. Among Nifty puts, 7,600 SP from the  June month expiry was the most active put with an addition of 0.24 million open interest. The maximum OI outstanding for Calls was at 8000 SP (4.78 mn) and that for Puts was at 7,500 SP (4.59 mn).  The respective Support and Resistance levels of Nifty are: Resistance 7699.97 --- Pivot Point 7639.63 --- Support --- 7596.07.

The Nifty Put Call Ratio (PCR) finally stood at 1.06 for June month contract. The top five scrips with highest PCR on OI were Mcleod Russel India with 1.58, Hero MotoCorp with 1.24, Tata Steel with 1.10, UltraTech Cement with 0.99, Aurobindo Pharma with 0.97.

Among most active underlying, Jaiprakash Associates witnessed an addition of 8.61 million of Open Interest in the June month futures contract, followed by Infosys witnessing an addition of 0.02 million of Open Interest in the June  month contract; while Tata Steel witnessed contraction of 1.30 million of Open Interest in the June month futures contract, State Bank of India witnessed an addition 0.19 million of Open Interest in the June month contract and Reliance Capital witnessed contraction of 0.15 million  of Open Interest in the June month's future contract.