Nifty witnesses smart pull back rally; recaptures 7,750 mark

After witnessing drubbing in previous session, CNX Nifty ended the session above its crucial 7,750 level with a gain of about half a percent on emergence of buying by funds and retail investors amid encouraging quarterly earnings. Some support also came in from National Council of Applied Economic Research’s (NCAER’s) statement saying that India’s GDP will expand at 5.2-5.7 percent this fiscal, with manufacturing sector showing signs of nascent recovery. Sentiments also remained up-beat after Indian Meteorological Department (IMD) said that the monsoon in the country is likely to remain strong till August 15, 2014. However, broader gains were capped amid caution ahead of the monthly derivatives contract expiry due on Thursday, with investors also awaiting the outcome of the U.S. Federal Reserve's meeting later in the day. Healthy buying was observed in Bankex, Consumer Durables and Healthcare counters, while selling pressure was seen in Capital Goods and information technology (IT) counters

Domestic benchmark started the trade with a gap down on lower-than-expected quarterly earnings by some companies including Larsen and Toubro and persistent profit-booking by funds and retail investors, ahead of monthly expiry of derivatives contracts on July 31, 2014. The index failed to gain momentum and dipped further in the mid morning session. However, some value buying in dying hours helped market to end the session in the green, recapturing its crucial 7,750 mark.  

The market may remain volatile tomorrow as traders would roll over positions in the futures & options (F&O) segment from the near month July 2014 series to August 2014 series. Sectorally, realty, metals and capital goods stocks are witnessing high rollover of positions while stocks from the auto, telecom and infrastructure space are witnessing relatively low rolls into the August series. Nifty July 2014 futures closed at 7788.30 on Wednesday at a discount of 3.10 points over spot closing of 7,791.40. Turnover on NSE's futures & options (F&O) segment jumped to Rs 342213.20 crore from Rs 284325.99 crore on July 28, 2014. Meanwhile, the top gainers from the F&O Securities were Arvind, HDIL and Ashok Leyland. The top losers were Larsen & Toubro, Havells India and Unitech.

The options data indicates 7600 and 7850 could be the range for the Nifty. On the calls front, maximum OI is at 8000 strike followed by 7800 and 7900 strikes. Puts maximum OI is accumulated at 7700 strike, followed by 7600 & 7500 strikes. The volatility index is down to sub-14 levels as market remains range-bound, a breakout from the range can see VIX surging back to 17-18 levels.

The India Volatility Index (VIX), a gauge for market's short term expectation of volatility decreased by 3.04% and reached 13.88. The 50-share CNX Nifty increased by 42.70 points or 0.55% to settle at 7,791.40. Nifty July 2014 futures closed at 7788.30 on Wednesday at a discount of 3.10 points over spot closing of 7,791.40, while Nifty August 2014 futures ended at 7825.15 at a premium of 33.75 points over spot closing. Nifty July futures saw contraction of 2.26 million (mn) units, taking the total outstanding open interest (OI) to 9.66 mn units. The near month derivatives contract will expire on July 31, 2014.

From the most active contracts, HDFC Bank July 2014 futures traded at a premium of 1.55 points at 839.45 compared with spot closing of 837.90. The number of contracts traded were 28,045.

Reliance Industries July 2014 futures traded at a premium of 0.50 points at 1006.50 compared with spot closing of 1006.00. The number of contracts traded were 37,927.

ICICI Bank July 2014 futures traded at a discount of 4.50 points at 1486.50 compared with spot closing of 1491.00. The number of contracts traded were 30,769.

L&T July 2014 futures traded at a premium of 0.65 points at 1526.75 compared with spot closing of 1526.10. The number of contracts traded were 42,002.

SBI July 2014 futures traded at a premium of 8.70 points at 2473.45 compared with spot closing of 2464.75. The number of contracts traded were 40,675. Among Nifty calls, 7800 SP from the July month expiry was the most active call with a contraction of 0.93 million open interests. Among Nifty puts, 7,700 SP from the July month expiry was the most active put with an addition of 0.49 million open interests. The maximum OI outstanding for Calls was at 8000 SP (7.19 mn) and that for Puts was at 7,700 SP (6.98 mn).  The respective Support and Resistance levels of Nifty are: Resistance 7824.20 --- Pivot Point 7765.90 --- Support --- 7733.10.

The Nifty Put Call Ratio (PCR) finally stood at 1.21 for July month contract. The top five scrips with highest PCR on OI were Just Dial (1.94), Asian Paint (1.57), ITC (1.55), TCS (1.36) and Dr. Reddys Laboratories (1.25).

Among most active underlying, Larsen & Toubro witnessed a contraction of 1.22 million of Open Interest in the July month futures contract, followed by State Bank of India witnessing a contraction of 0.69 million of Open Interest in the July month contract; while ICICI Bank witnessed a contraction of 1.79 million of Open Interest in the July month futures contract, Reliance Industries witnessed a contraction 4.66 million of Open Interest in the July month contract and HDFC Bank witnessed an addition of 10.19 million of Open Interest in the July month's future contract.