Rejuvenated Nifty closes above 7600 level with ease

Nifty continued its northward journey for second consecutive day on Wednesday and finished the excellent day of trade with outstanding gains of 97 points or 1.30%, on sustained buying by funds and retail investors after the Reserve Bank of India (RBI) relaxed the financing norms for infrastructure development and affordable housing. Further, the gains in rate sensitive stocks including banking, oil and gas and auto stocks supported the index. Sentiments further improved after reports suggested steady rains for the rest of July, particularly in the parched regions of central and northwest India, which should somewhat ease worries over inflation, water scarcity and a sub-par kharif crop.

The index ignored India’s widening trade data in which imports shot up by 8.33% to $38.24 billion, trade deficit widened to $11.76 billion, higher than $11.23 billion in May and $11.28 billion in the corresponding month of previous fiscal year. After a gap up opening, nifty showed some strength in morning trades, but the sentiments turned pessimistic as India’s June trade deficit touched 11-month high at $11.76 billion, however the market regained its momentum in the final hour of trade and ended the day of trade with a gain of over a percent reclaiming its crucial 7,600 mark.

With key events like the general elections and the Union Budget out of the way, the market participants are now focusing on the domestic factors such as corporate earnings and progress of the monsoon to drive the next leg of the market rally.

In the index option segment, maximum OI continues to be seen in the 8000-7800 calls and 7500-7400 puts indicating this is the trading range expectation. In today's session, some traders exited from 7400, 7500 and 7600 Call on the back of profit booking. On the other hand, 7600, 7500 and 7400 Put strikes saw addition of 8.30, 17.80 and 4.12 lakh shares, respectively.

All the sectoral indices on the NSE were settled in the green, CNX Realty remained the major gainer, up 4.33% followed by Bank Nifty up 2.51%, CNX Metal up by 2.25%, CNX Finance up by 1.93%, CNX PSU Bank up by 1.81%, CNX Media up by 1.67%, CNX Auto up by 1.51%, CNX Energy up by 1.18%, CNX Pharma up by 0.70%, CNX FMCG up by 0.47% and CNX IT up by 0.24%.

The India Volatility Index (VIX), a gauge for market's short term expectation of volatility decreased by 0.25% and reached 14.73. The 50-share CNX Nifty increased by 97.75 points or 1.30% to settle at 7,624.40. Nifty July 2014 futures closed at 7643.05 on Wednesday at a premium of 18.65 points over spot closing of 7,624.40, while Nifty August 2014 futures ended at 7681.25 at a premium of 56.85 points over spot closing. Nifty July futures saw an addition of 0.16 million (mn) units, taking the total outstanding open interest (OI) to 14.54 mn units. The near month derivatives contract will expire on July 31, 2014.

From the most active contracts, IDFC July 2014 futures traded at a discount of 2.10 points at 161.30 compared with spot closing of 163.40. The number of contracts traded were 48,295.

HDFC Bank July 2014 futures traded at a premium of 1.75 points at 838.25 compared with spot closing of 836.50. The number of contracts traded were 18,796.

DLF Bank July 2014 futures traded at a premium of 0.10 points at 226.25 compared with spot closing of 226.15. The number of contracts traded were 18,473.

Reliance Industries July 2014 futures traded at a premium of 4.75 points at 994.15 compared with spot closing of 989.40. The number of contracts traded were 34,614.

Tata Steel July 2014 futures traded at a discount of 0.05 points at 545.10 compared with spot closing of 545.15. The number of contracts traded were 18,957.

Among Nifty calls, 7600 SP from the July month expiry was the most active call with a contraction of 0.45 million open interests. Among Nifty puts, 7,500 SP from the June month expiry was the most active put with an addition of 1.20 million open interests. The maximum OI outstanding for Calls was at 8000 SP (9.12 mn) and that for Puts was at 7,500 SP (6.64 mn).  The respective Support and Resistance levels of Nifty are: Resistance 7665.52 --- Pivot Point 7598.98 --- Support --- 7557.87.

The Nifty Put Call Ratio (PCR) finally stood at 0.85 for July month contract. The top five scrips with highest PCR on OI were ITC (1.44), Just Dial (1.40), BATA India (1.11), Axis Bank (0.95) and Asian Paint (0.90).

Among most active underlying, IDFC witnessed an addition of 3.67 million of Open Interest in the June month futures contract, followed by State Bank of India witnessing a contraction of 0.16 million of Open Interest in the June  month contract; while ICICI Bank witnessed an addition of 0.99 million of Open Interest in the June month futures contract, Tata Steel witnessed an addition 1.16 million of Open Interest in the June month contract and Axis Bank witnessed a contraction of 0.40 million of Open Interest in the June month's future contract.