Nifty gains marginally after previous session’s drubbing; ends above 7,500 mark

Snapping two session’s downward trend, Nifty ended the first trading day of July F&O series on a positive note with a gain of over two tens of a percent. The index made a decent up move in early trades but pared some of its gains following the weakening trend on the Asian markets and overnight losses on the US bourses. The index recovered from its intraday lows on firm opening in European counterparts that supported the sentiments and edged above its crucial 7500 mark to close with a gain of over 15 points. Sentiments got some support after Reserve Bank of India (RBI) stated that prospects of economic recovery in India look bright following the formation of a stable government, though supply side issues need to be solved to help monetary policy bring down inflation. However, some traders turned cautious on report that foreign institutional investors sold shares worth a net Rs 601.89 crore on June 27, 2014. Meanwhile, stocks from Healthcare, Information Technology and Consumer Durables counters were supporting the markets’ uptrend, while those from Metal, Bankex and Auto counters were adding to the underlying cautious undertone. However, fresh buying by funds and retail investors, at the beginning of July derivatives series amid easing of global crude oil prices, buoyed the trading sentiment.

Fresh buildup of positions in Nifty options suggests the benchmark index could gain about 5 to 6% by the Budget day from the current levels. Rollover in Nifty futures from June series to July was 71.39% against the three-month average of 58.47%. Moreover, market wide rollovers were higher at 84.11% versus 3-month average of 80.63%. Traders have carried forward long positions despite the market remaining range-bound for the past three weeks on expectations of reform-oriented budget. Sectorally, cement, media and power stocks witnessed high rollover of positions while technology, telecom & automobile stocks witnessed relatively less rolls into the July series. In the midcap space, high rollover was seen in Union Bank, Karnataka Bank, McLeod Russel, Biocon and Bata India while low rollover was observed in Indraprastha Gas, Arvind, Just Dial, Glenmark and Petronet.

Looking at the index option data for July series maximum call OI is seen at 8000 followed by 7600 strike prices whereas maximum put OI is at 7000 & 7200 strike prices suggesting broader range is likely in between 8000-7200 levels. Meanwhile, India VIX - the gauge of underlying volatility in the market - has declined in today's session, which indicates that traders have slowdown buying options contracts. The top gainers from the F&O segment were HDIL, Divi's Laboratories and Havells India. The top losers were Ashok Leyland, United Spirits and UltraTech Cement.

The India Volatility Index (VIX), a gauge for market's short term expectation of volatility decreased by 0.42% and reached 17.62. The 50-share CNX Nifty increased by 15.60 points or 0.21% to settle at 7,508.80. Nifty July 2014 futures closed at 7543.90 on Friday at a premium of 35.10 points over spot closing of 7,508.80, while Nifty August 2014 futures ended at 7580.60 at a premium of 71.80 points over spot closing. Nifty July futures saw contraction of 0.16 million (mn) units, taking the total outstanding open interest (OI) to 14.05 mn units. The near month derivatives contract will expire on July 31, 2014.

From the most active contracts, DLF July 2014 futures traded at a premium of 1.40 points at 212.75 compared with spot closing of 211.35. The number of contracts traded were 15,582.

Reliance Industries July 2014 futures traded at a premium of 9.30 points at 1021.75 compared with spot closing of 1012.45. The number of contracts traded were 17,169.Tata Steel July 2014 futures traded at a discount of 4.90 points at 513.90 compared with spot closing of 518.80. The number of contracts traded were 12,180. ICICI Bank July 2014 futures were at a premium of 9.20 points at 1,398.40 compared with spot closing of 1,389.20. The number of contracts traded were 19,118.Sun Pharmaceuticals Industries July 2014 futures were at a premium of 7.20 points at 666.90 compared with spot closing of 659.70. The number of contracts traded were 11,831.

Among Nifty calls, 7700 SP from the July month expiry was the most active call with an addition of 0.34 million open interests. Among Nifty puts, 7,400 SP from the June month expiry was the most active put with an addition of 0.05 million open interests. The maximum OI outstanding for Calls was at 8000 SP (5.04 mn) and that for Puts was at 7,000 SP (7.68 mn).  The respective Support and Resistance levels of Nifty are: Resistance 7537.60 --- Pivot Point 7509.95 --- Support --- 7481.15.

The Nifty Put Call Ratio (PCR) finally stood at 0.92 for July month contract. The top five scrips with highest PCR on OI were ACC (1.12), Gail (1.10), Siemens (0.94), Mcleodruss (0.91) and Maruti Suzuki (0.84).

Among most active underlying, Tata Steel witnessed an addition of 1.12 million of Open Interest in the June month futures contract, followed by Jaiprakash Associates witnessing an addition of 10.76 million of Open Interest in the June  month contract; while DLF witnessed an addition of 1.32 million of Open Interest in the June month futures contract, State Bank of India witnessed an addition 0.10 million of Open Interest in the June month contract and ICICI Bank witnessed an addition of 0.83 million of Open Interest in the June month's future contract.