Nifty skids lower for second day in a row; ends below 7750 level

The fifty stock index -- Nifty -- continued its southward journey for second consecutive day on Wednesday and finished the choppy day of trade with cut of half a percent as the domestic and global investors turned cautious ahead of monthly expiry of derivatives contracts on July 31, 2014. The market momentum witnessed heavy fluctuation with bouts of selling pressure in realty, oil & gas, Metal, PSU and Auto sectors along with shares of midcap and smallcap companies. However, gains in Consumer Durables, FMCG and information technology (IT) companies stocks restrained the index to extend losses. Some support also came in from International Monetary Fund’s (IMF) statement that growth appears to have bottomed out in India.

After a negative but flat opening, nifty gradually enlarged its losses and slipped below the 7750 level in early afternoon deals. Thereafter, the key indices failed to show any kind of fervor due to lack of encouraging leads. The key gauges traded on a lackluster note for most part of the trades. However, mild short covering helped Nifty to ease some of its losses. The market may remain volatile this week as traders would roll over positions in the futures & options (F&O) segment from the near month July 2014 series to August 2014 series. Further, Investors are keeping a close watch on the progress of monsoon, earnings numbers of companies, foreign portfolio flows, oil prices and movement of rupee against the dollar this week. With the RBI’s next monetary policy meeting scheduled for August 5, interest rates and inflation will also be in focus.

In the index option segment, maximum OI continues to be seen in the 8000-7800 calls and 7700-7600 puts indicating the expected trading range. In today's session, some traders exited from 7900, 7800 and 7700 Puts on the back of profit booking. On the other hand, 7700 and 7800 Calls saw addition of 9.18 and 12.70 lakh shares, respectively.

The top gainers from the F&O Securities were Reliance Power, Glenmark Pharmaceuticals and Jaiprakash Associates. The top losers were DLF, IRB Infrastructure Developers and CESC. Moreover, India VIX - the gauge of underlying volatility in the market - has risen in the last two weeks, which show that traders are buying more options contracts as insurance against declines in the market.

The India Volatility Index (VIX), a gauge for market's short term expectation of volatility increased by 0.72% and reached 14.32. The 50-share CNX Nifty decreased by 41.75 points or 0.54% to settle at 7,748.70. Nifty July 2014 futures closed at 7743.25 on Monday at a discount of 5.45 points over spot closing of 7,748.70, while Nifty August 2014 futures ended at 7778.60 at a premium of 29.90 points over spot closing. Nifty July futures saw contraction of 2.91 million (mn) units, taking the total outstanding open interest (OI) to 11.93 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 0.50 points at 194.55 compared with spot closing of 194.05. The number of contracts traded were 18,849.

Axis Bank July 2014 futures traded at a discount of 0.75 points at 395.45 compared with spot closing of 396.20. The number of contracts traded were 18,795.

HDFC Bank July 2014 futures traded at a premium of 1.50 points at 831.50 compared with spot closing of 830.00. The number of contracts traded were 18,263.

Reliance Industries July 2014 futures traded at a premium of 2.60 points at 1006.60 compared with spot closing of 1004.00. The number of contracts traded were 32,642.

Tata Motors July 2014 futures traded at a discount of 1.40 points at 452.95 compared with spot closing of 454.35. The number of contracts traded were 17,092.Among Nifty calls, 7800 SP from the July month expiry was the most active call with an addition of 1.27 million open interests. Among Nifty puts, 7,700 SP from the July month expiry was the most active put with a contraction of 0.65 million open interests. The maximum OI outstanding for Calls was at 8000 SP (7.50 mn) and that for Puts was at 7,700 SP (6.36 mn).  The respective Support and Resistance levels of Nifty are: Resistance 7791.52 --- Pivot Point 7757.08 --- Support --- 7714.27.

The Nifty Put Call Ratio (PCR) finally stood at 1.02 for July month contract. The top five scrips with highest PCR on OI were Axis Bank (1.79), Just Dial (1.70), ITC (1.64), Asian Paint (1.49) and TCS (1.35).

Among most active underlying, Tata Steel witnessed a contraction of 5.59 million of Open Interest in the July month futures contract, followed by State Bank of India witnessing a contraction of 0.79 million of Open Interest in the July month contract; while Reliance Industries witnessed a contraction of 3.44 million of Open Interest in the July month futures contract, DLF witnessed a contraction 5.32 million of Open Interest in the July month contract and ICICI Bank witnessed a contraction of 2.57 million of Open Interest in the July month's future contract.