Vociferous Nifty gains for second consecutive session; closes above 7700

Continuing its bull run for second consecutive session, Nifty closed the event-loaded and volatile day of trade above the 7,700 level, after the Reserve Bank of India (RBI) lowered the statutory liquidity ratio (SLR) by 0.50 basis points half to 22% to free up more money for lending. RBI kept key policy rates unchanged but warned about inflationary risks should a shortfall in monsoon rains spark a surge in food prices. After getting a gap-up start, Nifty trimmed some of its gains in the late morning session on account of profit booking in frontline counters as concerned investors gauged the impact of policy decisions. Some amount anxiousness also came in as the headline HSBC Services Business Activity Index stood at 52.2 in July, lower from June's 17-month peak of 54.4. However, market turned optimistic in the late trades and started its north-ward journey on the back of fresh buying by funds and retail investors. Healthy buying was observed in automobile, metal, consumer durables, healthcare, realty and bank scrips. However, capital goods sectors came under sustained selling pressure.

After today’s surge, nifty may show some amount of correction in near future as rich valuations and global uncertainties could prompt investors to book some profits. Inflation has also become a cause of worry for the government and the Reserve Bank of India (RBI) as a weak monsoon has dampened hopes of any easing of prices or rate cuts. However, RBI Governor Raghuram Rajan clarified that below par monsoon may not mean below-par production.

In the index option segment, maximum OI continues to be seen in the 8000-7900 calls and 7500-7300 puts indicating this is the trading range expectation. In today's session, the 7600, 7700 and 7800 Call strikes saw addition of 1.08, 4.80 and 4.02 lakh shares, respectively. On the other hand, 7600, 7500 and 7400 Put strikes saw addition of 6.41, 7.82 and 3.15 lakh shares, respectively.  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, UNI Tech and UltraTech Cement. The top losers were Crompton Greaves, Petronet LNG and Tata Communications.

The India Volatility Index (VIX), a gauge for market's short term expectation of volatility decreased by 5.86% and reached 13.94. The 50-share CNX Nifty increased by 62.90 points or 0.82% to settle at 7,746.55. Nifty August 2014 futures closed at 7,772.85 on Tuesday at a premium of 26.30 points over spot closing of 7,746.55, while Nifty September 2014 futures ended at 7,806.40 at a premium of 59.85 points over spot closing. Nifty August futures saw an addition of 0.37 million (mn) units, taking the total outstanding open interest (OI) to 13.12 mn units. The near month derivatives contract will expire on August 28, 2014.

From the most active contracts, SBI August 2014 futures traded at a premium of 11.40 points at 2486.40 compared with spot closing of 2475.00. The number of contracts traded were 35,469.

ICICI Bank August 2014 futures traded at a premium of 5.15 points at 1494.25 compared with spot closing of 1489.10. The number of contracts traded were 23,388.

Reliance Industries August 2014 futures traded at a premium of 7.20 points at 990.75 compared with spot closing of 983.55. The number of contracts traded were 21,619.

Tata Steel August 2014 futures traded at a premium of 0.35 points at 565.85 compared with spot closing of 565.50. The number of contracts traded were 20,744.

DLF August 2014 futures traded at a discount of 0.65 points at 204.95 compared with spot closing of 205.60. The number of contracts traded were 19,124. Among Nifty calls, 7800 SP from the August month expiry was the most active call with an addition of 0.38 million open interests. Among Nifty puts, 7,600 SP from the August month expiry was the most active put with an addition of 0.36 million open interests. The maximum OI outstanding for Calls was at 8000 SP (5.34 mn) and that for Puts was at 7,500 SP (5.99 mn).  The respective Support and Resistance levels of Nifty are: Resistance 7771.72 --- Pivot Point 7741.43 --- Support --- 7691.02.

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 Bata India (1.94), Maruti Suzuki (1.35), IndusInd Bank (1.12), Coal India (1.06) and Ranbaxy (1.01).

Among most active underlying, State Bank of India witnessed an addition of 0.01 million of Open Interest in the August month futures contract, followed by Tata Steel witnessing an addition of 1.05 million of Open Interest in the August month contract; while IRB Infrastructure Developers witnessed an addition of 1.60 million of Open Interest in the August month futures contract, Infosys witnessed a contraction 0.13 million of Open Interest in the August month contract and ICICI Bank witnessed a contraction of 0.07 million of Open Interest in the August month's future contract.