Nifty snaps two days losing streak; ends above 7,650 mark

After witnessing drubbing in the two previous sessions, domestic index, Nifty heaved a sigh of relief, settling with gains of over a percent on fresh buying by funds and retail investors ahead of monetary policy review of the Reserve Bank of India (RBI) on Tuesday. Investor sentiments were supported by good progress of monsoon, recovery in Chinese macroeconomic data, increase in FIIs' capital inflow and value-buying by investors after recent sell-off. Overseas investors have invested in $6 billion into the Indian securities market in July 2014 taking their overall net inflows since the beginning of 2014 to more than $26 billion, driven by an investment-friendly government at the Centre.  After gap up opening, nifty showed some strength in morning trades, but the sentiments turned pessimistic in afternoon trades and index start drifting lower, however the market regained its momentum in the final hour of trade and finished the day gaining over a percent on the index. Traders were seen piling up positions in Consumer Durables, information technology (IT) and Power while selling was witnessed in Healthcare sector stocks.

Apart from RBI’s monetary policy meeting, nifty may need to brace for more turbulence over the next few months as rich valuations and global uncertainties could prompt investors - mainly foreign institutions - to lock in some profits. However, if economy showed some signs of a full-fledged recovery, Investors may shift to sectors and companies with stronger financials such as private banks, automobiles and information technology, from consumer goods, power equipment and real estate stocks.

In the index option segment, maximum OI continues to be seen in the 8000-7800 calls and 7500-7300 puts indicating this is the trading range expectation. In today's session, the 7700, 7800 and 7900 Call strikes saw addition of 5.06, 3.10 and 4.99 lakh shares, respectively. On the other hand, 7500, 7400 and 7200 Put strikes saw addition of 11.07, 7.60 and 2.28 lakh shares, respectively. Meanwhile, the top gainers from the F&O segment were Just Dial, CESC and Cromp Greav. The top losers were Syndicate Bank, Petronet LNG and Apollo Hospitals Enterprise.

The India Volatility Index (VIX), a gauge for market's short term expectation of volatility decreased by 2.66% and reached 14.81. The 50-share CNX Nifty increased by 81.05 points or 1.07% to settle at 7,683.65. Nifty August 2014 futures closed at 7718.20 on Monday at a premium of 34.55 points over spot closing of 7,683.65, while Nifty September 2014 futures ended at 7750.40 at a premium of 66.75 points over spot closing. Nifty August futures saw an addition of 0.27 million (mn) units, taking the total outstanding open interest (OI) to 12.74 mn units. The near month derivatives contract will expire on August 28, 2014.

From the most active contracts, DLF August 2014 futures traded at a discount of 0.50 points at 200.60 compared with spot closing of 201.10. The number of contracts traded were 12,637.

Reliance Industries August 2014 futures traded at a premium of 6.90 points at 991.30 compared with spot closing of 984.40. The number of contracts traded were 17,532.

Tata Steel August 2014 futures traded at a premium of 3.50 points at 555.50 compared with spot closing of 552.00. The number of contracts traded were 13,539.

Reliance Capital August 2014 futures traded at a discount of 0.45 points at 582.05 compared with spot closing of 582.50. The number of contracts traded were 12,097.

L&T August 2014 futures traded at a discount of 9.75 points at 1487.25 compared with spot closing of 1497.00. The number of contracts traded were 16,206.Among Nifty calls, 7800 SP from the August month expiry was the most active call with an addition of 0.20 million open interests. Among Nifty puts, 7,600 SP from the August month expiry was the most active put with an addition of 1.27 million open interests. The maximum OI outstanding for Calls was at 8000 SP (5.02 mn) and that for Puts was at 7,300 SP (5.98 mn).  The respective Support and Resistance levels of Nifty are: Resistance 7711.61 --- Pivot Point 7666.84 --- Support --- 7638.87.

The Nifty Put Call Ratio (PCR) finally stood at 1.12 for August month contract. The top five scrips with highest PCR on OI were Maruti Suzuki (1.23), IndusInd Bank (1.18), Ranbaxy (1.16), Just Dial (1.05) and Sun Pharma (1.04).

Among most active underlying, Infosys witnessed an addition of 0.12 million of Open Interest in the August month futures contract, followed by State Bank of India witnessing an addition of 4.43 million of Open Interest in the August month contract; while Tata Steel witnessed an addition of 0.04 million of Open Interest in the August month futures contract, Larsen & Toubro witnessed an addition 0.29 million of Open Interest in the August month contract and ICICI Bank witnessed a contraction of 0.08 million of Open Interest in the August month's future contract.