Nifty skids lower for second day in a row; manages to hold 8000 mark

The fifty stock index -- Nifty -- continued its southward journey for second consecutive day on Wednesday and finished the volatile day of trade with a cut of around one tenth of a percent. After making a flat but positive start, Nifty showed some strength in early morning trades but failed to sustain it on grim economic news from Europe and airstrikes in Syria. Afterwards, market was seesawed around the neutral line in early afternoon as investors were adopting a wait-and-watch stance ahead of the Supreme Court verdict on coal block allocations. However, deep selling pressure was triggered after the Supreme Court cancelled all coal block allocations except for government-run blocks that operate on a non-JV basis. Although the heavy selling was witnessed in Metal, Mining and PSU banks counters, but buying in the defensive stocks capped the losses. Meanwhile, some final hour short covering by traders and investors ahead of the expiry of September derivative contracts tomorrow helped the Nifty to cover its looses and conclude the session above the crucial 8000 mark.Power and Metal stocks ended lower after the Supreme Court cancelled all coal block allocations, which will adversely impact their margins. Besides, banking shares mainly public sector undertakings (PSU) were under pressure on concerns of asset quality due to their exposure to the cancelled coalmines.

The market which was recently set to enter a new orbit suddenly seems to have lost fuel. One should not forget that every rally has its limits and a correction was always on the cards. In tomorrow’s trade market might showed range bond section ahead of the expiry of derivatives contract on September 25, 2014. For near futures, investors and traders will keep an eye on Reserve Bank of India’s (RBI’s) monetary policy review next week.

Meanwhile, Nifty Future Rollover continues to remain higher than 3M average due to large short hedges created in last few trades. Sectorally, infrastructure, pharma and oil & gas stocks witnessed high rollover of positions while stocks from the telecom, power and metals space witnessed relatively low rollovers into the October series. In the index option segment, maximum OI continues to be seen in the 8200-8100 calls and 8000-7900 puts indicating this is the trading range expectation.

The top gainers from the F&O Securities were Reliance Power, Coal India and IFCI. The top losers were GMR Infrastructure, Jindal Steel & Power and Unitech. Meanwhile, India VIX - the gauge of underlying volatility in the market - has risen in today's session as traders turned cautious ahead of the expiry of derivatives contract on September 25, 2014.

The India Volatility Index (VIX), a gauge for market's short term expectation of volatility increased by 1.01% and reached 12.53. The 50-share CNX Nifty decreased by 15.15 points or 0.19% to settle at 8,002.40. Nifty September 2014 futures closed at 8015.20 on Wednesday at a premium of 12.80 points over spot closing of 8,002.40, while Nifty October 2014 futures ended at 8062.25 at a premium of 59.85 points over spot closing. Nifty September futures saw contraction of 2.03 million (mn) units, taking the total outstanding open interest (OI) to 8.07 mn units. The near month derivatives contract will expire on September 25, 2014.

From the most active contracts, HDFC Bank September 2014 futures traded at a premium of 2.40 points at 856.80 compared with spot closing of 854.40. The number of contracts traded were 26,807.

Reliance Industries September 2014 futures traded at a premium of 3.45 points at 968.95 compared with spot closing of 965.50. The number of contracts traded were 42,628.

Hindalco Industries September 2014 futures traded at a discount of 1.05 points at 156.20 compared with spot closing of 157.25. The number of contracts traded were 27,444.

Jindal Steel & Power September 2014 futures traded at a premium of 1.25 points at 189.80 compared with spot closing of 188.55. The number of contracts traded were 44,135.

ICICI Bank September 2014 futures traded at a premium of 2.15 points at 1520.05 compared with spot closing of 1517.90. The number of contracts traded were 28,500.

Among Nifty calls, 8100 SP from the September month expiry was the most active call with an addition of 1.16 million open interests. Among Nifty puts, 8,000 SP from the September month expiry was the most active put with a contraction of 0.13 million open interests. The maximum OI outstanding for Calls was at 8200 SP (7.51 mn) and that for Puts was at 8,000 SP (7.38 mn).  The respective Support and Resistance levels of Nifty are: Resistance 8046.28 --- Pivot Point 7998.17 --- Support --- 7954.28.

The Nifty Put Call Ratio (PCR) finally stood at 0.90 for September month contract. The top five scrips with highest PCR on OI were OFSS (90.00), Dr. Reddy's Laboratories (1.87), Kotak Bank (1.70), Maruti Suzuki (1.61) and ITC (1.29). 

Among most active underlying, State Bank of India witnessed a contraction of 0.64 million of Open Interest in the September month futures contract, followed by Reliance Industries witnessing a contraction of 5.51 million of Open Interest in the September month contract; while Tata Steel witnessed a contraction of 2.60 million of Open Interest in the September month futures contract, ICICI Bank witnessed a contraction 0.28 million of Open Interest in the September month contract and Infosys witnessed a contraction of 0.66 million of Open Interest in the September month's future contract.