Nifty ends flat with negative bias; manages to hold 7900 mark

After witnessing a bloodbath in the first half of the session, domestic benchmark CNX Nifty pared most of its losses and ended the day’s trade with a marginal cut of about 2 points as weakness in power and select banking shares offset the gains made in defensive stocks. Trading sentiment weakened after the Supreme Court on Monday held that all coal block allocations made since 1993 till 2010 have been done in an illegal manner, triggering widespread selling in metal and power sector stocks. However, losses remained capped as Industry body Assocham stated that quick implementation of the major programmes will lift the country's GDP growth by at least 1-1.5 percent. Some support also came from Finance Minister's statement that India could exceed the growth rates of 8-9% with a stable and decisive government in place.

After a gap down opening and showing some strength in morning trades, the sentiments turned pessimistic in afternoon deals taking the index lower, however the market regained its momentum in the final hour of trade and finished the day above its crucial 7,900 mark with a minor negative bias. Shares of power and mining were trading under pressure for the second consecutive day after Supreme Court verdict on coal blocks allocation case. Shares of Banks lending these companies fell on speculation that any ruling imposing a heavy penalty or cancelation of allocations would create huge amount of bad loans in their accounts.

The stock market may remain volatile in the near future as traders roll over positions in the futures and options segment from August 2014 series to September 2014 series. The near-month August F&O contracts expire on August 28, 2014. The top gainers from the F&O segment were Havells India, Voltas and Petronet LNG. On the other hand, the top losers were Jindal Steel, IDFC and ACC.

In the index option segment, maximum OI continues to be seen in the 8000-7900 calls and 7700-7800 puts indicating the expected trading range. Meanwhile, India VIX - the gauge of underlying volatility in the market - has risen in today’s session, which shows 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 0.83% and reached 13.90. The 50-share CNX Nifty decreased by 1.55 points or 0.02% to settle at 7,906.30. Nifty August 2014 futures closed at 7906.50 on Tuesday at a premium of 1.75 points over spot closing of 7,904.75, while Nifty September 2014 futures ended at 7943.55 at a premium of 38.80 points over spot closing. Nifty August futures saw contraction of 2.32 million (mn) units, taking the total outstanding open interest (OI) to 10.51 mn units. The near month derivatives contract will expire on August 28, 2014.

From the most active contracts, Hindalco Industries August 2014 futures traded at a discount of 0.40 points at 170.75 compared with spot closing of 171.15. The number of contracts traded were 20,551.

HDFC Bank August 2014 futures traded at a premium of 1.90 points at 843.80 compared with spot closing of 841.90. The number of contracts traded were 27,820.

Reliance Industries August 2014 futures traded at a premium of 1.85 points at 994.20 compared with spot closing of 992.35. The number of contracts traded were 26,969.

Jindal Steel & Power August 2014 futures traded at a discount of 0.20 points at 237.55 compared with spot closing of 237.75. The number of contracts traded were 28,032.

Tata Steel August 2014 futures traded at a premium of 1.20 points at 526.15 compared with spot closing of 524.95. The number of contracts traded were 20,611.Among Nifty calls, 7900 SP from the August month expiry was the most active call with an addition of 1.06 million open interests. Among Nifty puts, 7,900 SP from the August month expiry was the most active put with a contraction of 0.69 million open interests. The maximum OI outstanding for Calls was at 8000 SP (9.88 mn) and that for Puts was at 7,800 SP (6.50 mn).  The respective Support and Resistance levels of Nifty are: Resistance 7925.98 --- Pivot Point 7894.22 --- Support --- 7872.98.

The Nifty Put Call Ratio (PCR) finally stood at 1.25 for August month contract. The top five scrips with highest PCR on OI were Kotak Bank (2.49), Maruti Suzuki (1.90), Cipla (1.83), M&M (1.77) and Tata Motors (1.37). 

Among most active underlying, State Bank of India witnessed a contraction of 0.52 million of Open Interest in the August month futures contract, followed by Tata Steel witnessing a contraction of 3.06 million of Open Interest in the August month contract; while HDFC Bank s witnessed a contraction of 9.20 million of Open Interest in the August month futures contract, Infosys witnessed a contraction 0.46 million of Open Interest in the August month contract and Tata Motors witnessed a contraction of 3.23 million of Open Interest in the August month's future contract.