Nifty plunges below 7,600 mark; subdued global cues drag

Carrying the inertia from the previous session and opening gap up, Nifty, the 50-share index, after trading nearly range-bound for the first half of the session, displayed some gut-wrenching volatility as it fell more than two percent from the day’s high level second half to soon recover and fall again with a cut of around a percentage point. Sentiments weakened as increase in oil prices may trigger macroeconomic worries such as fuel price inflation and increase in India's current account deficit and fiscal deficit for India. The index traded in the positive terrain during first half and slipped in red in the second half on selling by funds and retail investors, tracking weak global cues amidst deepening crisis in Iraq.

The selloff in Indian markets was broad-based, however healthcare stocks, which are considered defensive bets in a falling market, held on to modest gains. Shares of oil marketing companies cracked as global crude oil prices rose on concerns of oil supply disruption. Moreover, FMCG majors ended lower amid concerns that rising inflation could hurt consumer spends and influence volume growth. Meanwhile, Brent crude rose towards $114 a barrel on Wednesday as Sunni militants pushed forward in northern Iraq, striking a key refinery near Baghdad and stoking worries about oil exports from the key producer. However, sentiments got some support as the RBI Governor stated that India has enough foreign exchange reserves and is better prepared to deal with Iraq crises.

The market is likely to show some recovery in coming days as optimism about reforms oriented decisions by the new government in upcoming Union budget, which will be expected to be unveiled by mid-July, the first major policy document of the Narendra Modi government. Looking at the index option data for June series maximum call OI is seen at 7700 followed by 7600 strike prices whereas maximum put OI is at 7500 & 7300 strike prices suggesting broader range is likely in between 7300-7700 levels. The top gainers from F&O Securities were Zee Entertainment Enterprises, Cipla and Lupin. The top losers were Unitech, Indiabulls Real Estate and Jaiprakash Associates. Meanwhile, India VIX - the gauge of underlying volatility in the market - has risen in today's session, which shows that traders are buying more options contracts as insurance against declines in the market.

Most of the sectoral indices on the NSE were settled in the red, CNX Realty down by 1.40%, CNX Energy down by 1.37%, CNX PSU Bank down by 1.15%, CNX IT down by 1.03%, Bank Nifty down by 0.99%, CNX Finance down by 0.94%, CNX Auto down by 0.90%, CNX Metal down by 0.82% and CNX FMCG down by 0.78% while CNX Media up by 1.40% and CNX Pharma up by 0.12% were the losers on the NSE sectoral indices.

The India Volatility Index (VIX), a gauge for market's short term expectation of volatility increased by 5% and reached 18.58. The 50-share CNX Nifty decreased by 73.50 points or 0.96% to settle at 7,558.20. Nifty June 2014 futures closed at 7569.40 on Wednesday at a premium of 11.20 points over spot closing of 7,558.20, while Nifty July 2014 futures ended at 7603.15 at a premium of 44.95 points over spot closing. Nifty June futures saw contraction of 0.68 million (mn) units, taking the total outstanding open interest (OI) to 14.13 mn units. The near month derivatives contract will expire on June 26, 2014.

From the most active contracts, Reliance Industries June 2014 futures traded at a discount of 1.45 points at 1,065.30 compared with spot closing of 1,066.75. The number of contracts traded were 44,260.

SBI June 2014 futures were at a premium of 6.55 points at 2,648.10 compared with spot closing of 2,641.55. The number of contracts traded were 37,979.

Cipla June 2014 futures were at a discount of 0.15 points at 424.95 compared with spot closing of 425.10. The number of contracts traded were 36,664.

ICICI Bank June 2014 futures were at a discount of 1.65 points at 1,419.85 compared with spot closing of 1,421.50. The number of contracts traded were 31,813.

Reliance Capital June 2014 futures traded at a discount of 2.40 points at 613.10 compared with spot closing of 615.50. The number of contracts traded were 24,400. Among Nifty calls, 7,700 SP from the June month expiry was the most active call with an addition of 0.95 million open interest. Among Nifty puts, 7,500 SP from the  June month expiry was the most active put with contraction of 0.17 million open interest. The maximum OI outstanding for Calls was at 7700 SP (5.98 mn) and that for Puts was at 7,500 SP (5.34 mn).  The respective Support and Resistance levels of Nifty are: Resistance 7642.30 --- Pivot Point 7578.90 --- Support --- 7494.80.

The Nifty Put Call Ratio (PCR) finally stood at 0.96 for June month contract. The top five scrips with highest PCR on OI were Mcleod Russel India (1.51), Aurobindo Pharma (1.10), Maruti Suzuki (0.99), Gail (0.98) and BPCL (0.87).

Among most active underlying, State Bank of India witnessed a contraction of 0.40 million of Open Interest in the June month futures contract, followed by Reliance Industries witnessing an addition of 0.35 million of Open Interest in the June  month contract; while Reliance Capital witnessed a contraction of 0.06 million of Open Interest in the June month futures contract, Tata Steel witnessed a contraction 0.91 million of Open Interest in the June month contract and ICICI Bank witnessed an addition of 0.40 million  of Open Interest in the June month's future contract.