Bears run berserk; Nifty ends below 7950 level

Trading sentiments continued to remain bearish on Tuesday as CNX Nifty finished the trade in the red breaching its crucial 7,950 mark on caution ahead of the US Federal Reserve's two-day meeting. Market traded in a range till afternoon trades however witnessed a drastic fall in second half of trade tracking the downtick in European counterparts. Speculation that the Fed could raise interest rates sooner and faster than previously expected has rattled share markets around the globe and supported the US dollar. Sentiments in the domestic market also weakened as India's export growth slipped to 2.35 per cent at $26.95 billion in August, while the export numbers came in at a five-month low they pushed the trade deficit to a four-month high at $10.83 billion, as imports of gold surged 176 percent after policy makers eased shipment curbs. Besides, selling by foreign funds in the previous session also weighed on market sentiments. Foreign funds sold index futures worth Rs 1,394 crore and Rs 74.59 crore in the cash segment on September 16, 2014. However, losses remained capped as Organisation for Economic Cooperation and Development (OECD), revised its forecast projection to 5.7 percent growth for the Indian economy for FY15, much higher than its 4.9 percent growth projection in May this year.

In today’s trade Nifty breached some important psychological levels like 8000 and 7950, which indicate some more correction in near term on expectations of a more hawkish Fed stance on monetary policy. Improving US retail sales and consumer confidence have fuelled expectations that the Fed will hike the interest rates, which might induce foreign funds to withdraw money from emerging markets like India. However, some investors are still firm with the buy on dip strategy, and this could help Nifty rise above 8000 mark.

In the index options segment, maximum OI continues to be seen in the 8300-8200 calls and 8000-7900 puts indicating the expected trading range. In today's session, some traders exited from 8200, 8100 and 8000 puts on the back of profit booking. Moreover, some strategists have been creating long strangles in Nifty, buying calls at 8000 and 8100 levels and buying puts at 7800 and 7900 levels as they expecting high volatility in this week.

Most of the sectoral indices on the NSE settled in the red, CNX Realty declined by 3.90%, CNX PSU Bank down by 3.08%, CNX Energy down by 2.72%, CNX Metal down by 2.38%, CNX Finance down by 2.07%, Bank Nifty down by 2%, CNX Auto down 1.93%, CNX Media down by 1.64%, CNX Pharma down by 1.04% and CNX IT down by 0.52% remained the losers in the trade, while CNX FMCG up by 0.02% was sole gainer in the trade.

The India Volatility Index (VIX), a gauge for market's short term expectation of volatility increased by 0.21% and reached 13.28. The 50-share CNX Nifty decreased by 109.10 points or 1.36% to settle at 7,932.90. Nifty September 2014 futures closed at 7960.85 on Tuesday at a premium of 27.95 points over spot closing of 7,932.90, while Nifty October 2014 futures ended at 8006.70 at a premium of 73.80 points over spot closing. Nifty September futures saw contraction of 0.52 million (mn) units, taking the total outstanding open interest (OI) to 12.91 mn units. The near month derivatives contract will expire on September 25, 2014.

From the most active contracts, Reliance Industries September 2014 futures traded at a premium of 5.05 points at 984.05 compared with spot closing of 979.00. The number of contracts traded were 27,666.

Tata Steel September 2014 futures traded at a premium of 1.90 points at 490.60 compared with spot closing of 488.70. The number of contracts traded were 17,188.

Apollo Tyre September 2014 futures traded at a premium of 0.55 points at 196.25 compared with spot closing of 195.70. The number of contracts traded were 13,596.

Arvind September 2014 futures traded at a premium of 1.55 points at 306.85 compared with spot closing of 305.30. The number of contracts traded were 18,188.

Yes Bank September 2014 futures traded at a premium of 1.65 points at 578.05 compared with spot closing of 576.40. The number of contracts traded were 15,569.

Among Nifty calls, 8100 SP from the September month expiry was the most active call with an addition of 0.81 million open interests. Among Nifty puts, 8,000 SP from the September month expiry was the most active put with a contraction of 1.02 million open interests. The maximum OI outstanding for Calls was at 8200 SP (7.27 mn) and that for Puts was at 8,000 SP (6.38 mn).  The respective Support and Resistance levels of Nifty are: Resistance 8010.15 --- Pivot Point 7967.65 --- Support --- 7890.40.

The Nifty Put Call Ratio (PCR) finally stood at 0.92 for September month contract. The top five scrips with highest PCR on OI were OFSS (3.19), SUN TV (1.21), Cipla (1.19), Kotak Bank (1.14) and Maruti Suzuki (0.98). 

Among most active underlying, State Bank of India witnessed a contraction of 0.14 million of Open Interest in the September month futures contract, followed by Arvind witnessing a contraction of 0.52 million of Open Interest in the September month contract; while Tata Steel witnessed a contraction of 1.22 million of Open Interest in the September month futures contract, Reliance Industries witnessed an addition 0.16 million of Open Interest in the September month contract and Yes Bank witnessed a contraction of 0.24 million of Open Interest in the September month's future contract.