Nifty trims losses; ends marginally below 7500 mark

After witnessing bloodbath in the first half, domestic benchmark CNX S&P Nifty pared most of its losses and ended the day’s trade with a marginal cut of over 18 points. Although, the index opened on a positive note tracking strong global cues but it erased all early gains and turned red on account of  consistent sell-off witnessed in index heavyweight ITC on reports that the government may raise taxes on cigarettes aggressively in the upcoming budget in July 2014. The index commenced its southbound journey during the afternoon session as European markets made a sluggish opening after some disappointing data from both Germany and France. However, sentiments took a U-turn in the final hour of trade and bulls came back in action led by recovery in PSU, Oil & Gas and Metal stocks while, value buying in fundamentally strong stocks too supported the turnaround. Some support came in from reports that the government is likely to defer implementation of the controversial GAAR provisions by one more year to April 2017 and exempt transactions made up to March 2013 in a bid to improve business sentiment.

Finally, Nifty ended the session below its crucial 7,500 mark with a cut of over eighteen points. Meanwhile, Sugar companies were trading higher after the government announced various measures to help the sector. Shares of companies related to the Indian Railways network were trading higher after Narendra Modi led government hiked passenger fares by 14.2% and freight tariffs by 6.5%. Moreover, Metal shares gain on hopes of better demand after a preliminary HSBC survey showed activity in China's factory sector expanded in June for the first time in six months as new orders surged.

Indian stock market is expected to witness volatility as traders roll over positions in the futures & options (F&O) segment from the near month June 2014 series to July 2014 series, while movement in crude oil prices linked to the Iraq unrest and the progress of monsoon will set the tone this week. Some of the other factors that are likely to impact stock market movement include, trend in global equity markets and investment activity of foreign institutional investors. Looking at the index option data for June series maximum call OI is seen at 7600 followed by 7700 strike prices whereas maximum put OI is at 7500 & 7400 strike prices suggesting broader range is likely in between 7400-7700 levels. Meanwhile, the Reserve Bank of India (RBI) on Friday, June 20, 2014, issued guidelines allowing foreign portfolio investors (FPIs) exposure in the exchange traded currency derivatives (ETCD) market. The top gainers from F&O Securities were Syndicate Bank, India Cements and Petronet LNG. The top losers were ITC, Kotak Mahindra Bank and United Spirits. Further, India VIX - the gauge of underlying volatility in the market - has risen in today's session as traders turned cautious ahead of the F&O expiry on June 26, 2014.

The India Volatility Index (VIX), a gauge for market's short term expectation of volatility increased by 0.61% and reached 18.96. The 50-share CNX Nifty decreased by 18.10 points or 0.24% to settle at 7,493.35. Nifty June 2014 futures closed at 7505.75 on Monday at a premium of 12.40 points over spot closing of 7,493.35, while Nifty July 2014 futures ended at 7537.80 at a premium of 44.45 points over spot closing. Nifty June futures saw contraction of 0.41 million (mn) units, taking the total outstanding open interest (OI) to 13.55 mn units. The near month derivatives contract will expire on June 26, 2014.

From the most active contracts, HDFC Bank June 2014 futures traded at a premium of 0.95 points at 823.65 compared with spot closing of 822.70. The number of contracts traded were 17,878.

ITC June 2014 futures were at a discount of 1.30 points at 316.20 compared with spot closing of 317.50. The number of contracts traded were 29,509.

ONGC June 2014 futures were at a discount of 1.20 points at 438.30 compared with spot closing of 439.50. The number of contracts traded were 21,775.

Reliance Industries June 2014 futures traded at a premium of 0.65 points at 1042.30 compared with spot closing of 1041.65. The number of contracts traded were 34,471.

ICICI Bank June 2014 futures were at a premium of 5.20 points at 1,419.90 compared with spot closing of 1,414.70. The number of contracts traded were 23,035. Among Nifty calls, 7,600 SP from the June month expiry was the most active call with an addition of 0.48 million open interest. Among Nifty puts, 7,500 SP from the  June month expiry was the most active put with a contraction of 0.31 million open interest. The maximum OI outstanding for Calls was at 7600 SP (7.99 mn) and that for Puts was at 7,500 SP (5.35 mn).  The respective Support and Resistance levels of Nifty are: Resistance 7538.23 --- Pivot Point 7489.92 --- Support --- 7445.03.

The Nifty Put Call Ratio (PCR) finally stood at 0.87 for June month contract. The top five scrips with highest PCR on OI were Mcleod Russel India (1.51), Aurobindo Pharma (1.25), Asian Paint (1.14), GAIL (0.97) and Maruti Suzuki (0.96).

Among most active underlying, State Bank of India witnessed a contraction of 0.50 million of Open Interest in the June month futures contract, followed by Reliance Industries witnessing a contraction of 2.35 million of Open Interest in the June  month contract; while ITC witnessed an addition of 8.17 million of Open Interest in the June month futures contract, Infosys witnessed a contraction 0.79 million of Open Interest in the June month contract and Tata Steel witnessed an addition of 3.72 million of Open Interest in the June month's future contract.