Nifty bounces back after four consecutive sessions’ drubbing; ends above 7,550 mark

After witnessing some drubbing in the previous four sessions, Nifty, the 50-share index, heaved a sigh of relief, settling with good gains as sentiment turned bullish on hopes of strong reforms in the Union Budget. Further, firm global cues coupled with the appreciation in rupee value against the dollar, added to the optimistic sentiments. However, gains remained capped on report that foreign portfolio investors (FPIs) sold shares worth a net Rs 214.49 crore on June 23, 2014. After a positive opening, market started extending its gains as sustained buying was witnessed in all the key heavyweights along with broader indices. Afterwards, the local index extended its gains and reclaimed its crucial 7,550 mark in morning trade on increasing buying by funds and retail investors, supported by fall in global crude oil prices after fading fears about supply disruption in Iraq. Market continued their strong run till early afternoon trade. However, some amount of profit booking emerged at higher level in mid afternoon, but in the final hour of trade Nifty spiked up and ended the day’s trade with a gain of over a percentage point, recapturing its crucial 7,550 level. Meanwhile, shares of sugar companies continued their upward march for the second day in a row, after the government announced various measures to help the sector. Shares of Oil & gas companies traded higher on report that the government may hike gas prices to $5.5-6.8/unit from $4.2/unit. Moreover, buying was also witnessed in metal stocks on improved manufacturing data from China supported the sentiments. However, there was mild weakness in defensive sectors stocks such as IT and teck on the back of rupee appreciation.

Nifty is likely to remain volatile in the near future as traders rolled over positions in the futures & options (F&O) segment from the near month June series to July series. Meanwhile, trading could also be influenced by developments in Iraq, where government forces reportedly regained control of border crossings into Syria and Jordan. In the index option segment, maximum OI continues to be seen in the 7700-7600 calls and 7500-7400 puts indicating this as the expected trading range. In today's session, some traders exited from 7400, 7500 and 7600 calls on the back of profit booking. Moreover, some strategists have been creating long strangles in Nifty, buying calls at 7650 and 7700 levels and buying puts at 7500 and 7450 levels as they expecting high volatility in last week of F&O expiry.

The top gainers from the F&O Securities were Hindustan Petroleum Corporation, Petronet LNG and Jubilant Foodworks. The top losers were Zee Entertainment Enterprises, Kotak Mahindra Bank and Ranbaxy Laboratories. Meanwhile, 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 this week.

The India Volatility Index (VIX), a gauge for market's short term expectation of volatility increased by 1.19% and reached 19.18. The 50-share CNX Nifty increased by 86.85 points or 1.16% to settle at 7,580.20. Nifty June 2014 futures closed at 7595.55 on Tuesday at a premium of 15.35 points over spot closing of 7,580.20, while Nifty July 2014 futures ended at 7627.95 at a premium of 47.75 points over spot closing. Nifty June futures saw contraction of 2.18 million (mn) units, taking the total outstanding open interest (OI) to 11.36 mn units. The near month derivatives contract will expire on June 26, 2014.

From the most active contracts, Reliance Communications June 2014 futures traded at a premium of 0.90 points at 152.05 compared with spot closing of 151.15. The number of contracts traded were 27,298.

HDFC Bank June 2014 futures traded at a premium of 2.30 points at 831.00 compared with spot closing of 828.70. The number of contracts traded were 22,230.

Reliance Industries June 2014 futures traded at a premium of 2.40 points at 1063.50 compared with spot closing of 1061.10. The number of contracts traded were 39,434.

ONGC June 2014 futures were at a premium of 2.50 points at 444.65 compared with spot closing of 442.15. The number of contracts traded were 24,586.

ICICI Bank June 2014 futures were at a premium of 0.70 points at 1,442.55 compared with spot closing of 1,441.85. The number of contracts traded were 27,140.

Among Nifty calls, 7,600 SP from the June month expiry was the most active call with a contraction of 1.01 million open interests. Among Nifty puts, 7,500 SP from the June month expiry was the most active put with an addition of 1.71 million open interests. The maximum OI outstanding for Calls was at 7700 SP (8.09 mn) and that for Puts was at 7,500 SP (6.81 mn).  The respective Support and Resistance levels of Nifty are: Resistance 7610.63 --- Pivot Point 7562.92 --- Support --- 7532.49.

The Nifty Put Call Ratio (PCR) finally stood at 0.99 for June month contract. The top five scrips with highest PCR on OI were Mcleod Russel India (1.60), GAIL (1.38), Asian Paint (1.36), Aurobindo Pharma (1.31) and TCS (1.30).

Among most active underlying, Reliance Industries witnessed a contraction of 3.86 million of Open Interest in the June month futures contract, followed by State Bank of India witnessing a contraction of 0.53 million of Open Interest in the June  month contract; while Reliance Capital witnessed a contraction of 2.02 million of Open Interest in the June month futures contract, Oil & Natural Gas Corporation witnessed a contraction 4.49 million of Open Interest in the June month contract and Axis Bank witnessed a contraction of 1.40 million of Open Interest in the June month's future contract.